Dahl v. Aerospace Employees' Retirement Plan of the Aerospace Corporation et al
Filing
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MEMORANDUM OPINION. Signed by District Judge James C. Cacheris on 12/01/2015. (dvanm, )
IN THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF VIRGINIA
Alexandria Division
PHYLLIS DAHL,
Plaintiff,
v.
AEROSPACE EMPLOYEES’
RETIREMENT PLAN OF THE
AEROSPACE CORP., et al.
Defendants.
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M E M O R A N D U M
1:15cv611 (JCC/IDD)
O P I N I O N
This matter is before the Court on Motions for
Attorneys’ Fees from Defendants Ronald S. Goetz and Julie
Goetz’s (“Goetz Defendants”) [Dkt. 23], and Defendant Aerospace
Employees’ Retirement Plan [Dkt. 25] (collectively
“Defendants”).
Plaintiff Phyllis Dahl responded to these
motions and Defendants waived oral argument.
For the following
reasons, the Court will deny the motions.
I. Background
The Court’s two prior memorandum opinions describe the
procedural and factual history of this case at length.
Those
facts are presumed known and recounted here only to the extent
necessary for the present motions.
1
Plaintiff Phyllis Dahl (“Dahl”) is the former spouse
of Defendant Ronald Goetz (“Mr. Goetz”).
When they divorced in
2003, a Virginia court incorporated a written settlement
agreement between Dahl and Mr. Goetz.
The agreement gave Dahl
the option to elect a fifty, seventy-five, or one hundred
percent survivor annuity benefit under Mr. Goetz’s retirement
plan maintained by Defendant Aerospace Employees’ Retirement
Plan (“AERP”).
Mr. Goetz retired eleven years later, without
notifying Dahl.
By that time, Dahl had not informed AERP of her
option to elect a survivor annuity payment.
After learning of
Mr. Goetz’s retirement, Dahl sought to exercise her benefits
option by submitting a draft Qualified Domestic Relations Order
(“QDRO”) to AERP.
AERP would not recognize the draft QDRO,
however, because Mr. Goetz’s survivor annuity vested in his
current wife, Mrs. Goetz, at the time of his retirement.
After pursuing an administrative appeal to AERP, Dahl
filed suit in this Court seeking, in relevant part, injunctive
and declaratory relief voiding Mr. Goetz’s beneficiary
designation as the product of fraud or bad faith and permitting
Dahl to exercise her option to elect survivor annuity benefits.
Dahl’s argument for relief hinged on extending the Yiatchos
Doctrine to ERISA and the QDRO process.
This Doctrine arose
from Free v. Bland, 369 U.S. 663 (1962) and Yiatchos v.
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Yiatchos, 376 U.S. 306 (1964), in which the Supreme Court said
that a federal regulatory scheme’s preemption of state law
should “not be used as a shield for fraud or to prevent relief
‘where the circumstances manifest fraud or a breach of trust
tantamount thereto.’”
Yiatchos, 376 U.S. at 308 (quoting Free,
369 U.S. at 670).
Defendants separately moved to dismiss Dahl’s case.
After briefing and oral argument, this Court applied clear
Fourth Circuit precedent to conclude that the survivor benefit
vested in Mrs. Goetz when Mr. Goetz retired.
(Mem. Op. [Dkt.
21] at 10 (applying Hopkins v. AT&T Global Info. Solutions Co.,
105 F.3d 153 (4th Cir. 1997).)
Furthermore, the Court found the
Yiatchos Doctrine was inapplicable to this ERISA case, noting
that Yiatchos developed in a different regulatory context and
has not clearly been applied to an ERISA case like Dahl’s.
(Id.
at 11-16.)1
After the Court granted the motion to Dismiss, the
Goetz Defendants and AERP filed separate motions for attorneys’
fees.
(Goetz Mot. [Dkt. 23]; AERP Mot. [Dkt. 25].)
briefs in opposition to these motions.
(Dahl Opp’n to Goetz
Mot. [Dkt. 29]; Dahl Opp’n to AERP Mot. [Dkt. 30].)
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Dahl filed
Thereafter,
The Court elaborated on the inapplicability of the
Yiatchos Doctrine in its Memorandum Opinion denying Dahl’s
motion to alter or amend the judgment. (See Mem. Opp. [Dkt.
37].)
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Defendants waived oral argument, making these motions ripe for
disposition.
While the motions for attorneys’ fees were before the
Court, Dhal motioned for reconsideration of the dismissal of her
case.
(Pl.’s Mem. in Supp. [Dkt. 28]; Pl.’s Reply Mem. [Dkt.
35].)
The Court denied the motion to reconsider in a written
memorandum opinion and accompanying order.
37].)
(Mem. Opp. [Dkt.
Thereafter, Dahl noticed an appeal to the Fourth Circuit.
II. Legal Standard
“In an ERISA action, a district court may, in its
discretion, award costs and reasonable attorneys’ fees to either
party under 29 U.S.C. § 1132(g)(1), so long as that party has
achieved ‘some degree of success on the merits.’”
Williams v.
Metro. Life Ins. Co., 609 F.3d 622, 634 (4th Cir. 2010) (citing
Hardt v. Reliance Std. Life Ins. Co., 560 U.S. 242 (2010)).2
Courts in this Circuit employ a three-step framework for
assessing fee requests in ERISA cases.
See, e.g., Bd. of Trs.
for the Hampton Roads Shipping Ass’n-Int’l Longshoremen’s Ass’n
2
The statutory grant of discretion to award attorneys’
fees reads as follows: “In any action under this subchapter
(other than an action described in paragraph (2)) 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). The exclusion
in “paragraph (2)” relates to a plan fiduciary pursuing claims
for delinquent contributions, which is not implicated in the
present case. See id. § 1132(g)(2) (cross-referencing § 1145’s
delinquent contribution enforcement provision).
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v. Ransone-Gunnell, 781 F. Supp. 2d 286, 290 (E.D. Va. 2011).
First, the motioning party must have achieved “some degree of
success on the merits.”
Williams, 609 F.3d at 634.
Second, the
court exercises its discretion to determine whether the moving
party “should be awarded attorneys’ fees.”
Id. at 635.
Lastly,
if fees are deemed appropriate, the court considers the
reasonableness of the fees requested.
F. Supp. 2d at 291.
of this analysis.
See Ransone-Gunnell, 781
Defendants’ motions fail at the second step
Therefore, the Court does not reach the
reasonableness factor.
III. Analysis
A.
Jurisdiction
As a threshold matter, this Court retains jurisdiction
over these pending motions for attorneys’ fees even though Dahl
noticed an appeal of the underlying motions to dismiss and
reconsider.
Ordinarily, a notice of appeal divests a district
court of jurisdiction over a case.
See Marrese v. Am. Academy
of Orthopaedic Surgeons, 470 U.S. 373, 379 (1985) (“In general,
filing of a notice of appeal confers jurisdiction on the court
of appeals and divests the district court of control over those
aspects of the case involved in the appeal.”)
An exception to
this rule exists, however, to permit district courts to resolve
issues collateral to the main cause of action.
Doe v. Public
Citizen, 749 F.3d 246, 258 (4th Cir. 2014) (“We have recognized
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limited exceptions to the general rule that permit district
courts to take subsequent action on matters that are collateral
to the appeal . . . .”).
This collateral-issue exception
applies to motions for attorneys’ fees.
See Langham-Hill
Petroleum Inc. v. S. Fuels Co., 813 F.2d 1327, 1331 (4th Cir.
1987) (applying exception to motion for fees under Federal Rule
of Civil Procedure 11); Carr v. Super 8 Motel Developers, Inc.,
964 F. Supp. 1046, 1047 n.2 (E.D. Va. 1997) (applying exception
to 42 U.S.C. § 1988 fees motion).
The present motions for
attorneys’ fees are collateral to the merits of this ERISA case,
making jurisdiction proper before this Court.
B.
Step 1: Degree of Success on the Merits
All Defendants satisfy the first step of the
attorneys’ fees analysis because they each achieved some degree
of success on the merits.
See Hardt v. Reliance Standard Life
Ins. Co., 560 U.S. 242, 255 (2010) (“[A] court in its discretion
may award fees and costs to either party, as long as the fee
claimant has achieved some degree of success on the merits.”
(internal citation and quotation omitted)).
The “some degree of
success” standard is satisfied when “the court can fairly call
the outcome of the litigation some success on the merits without
conducting a ‘lengthy inquir[y] into the question whether a
particular party’s success was ‘substantial’ or occurred on a
central issue.’”
Id.
It requires no lengthy inquiry to
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conclude that all Defendants succeeded on central issues through
their motions to dismiss.
The Goetz Defendants sought to dismiss this case so
Mrs. Goetz could retain her vested benefits.
They raised
several arguments in pursuit of that goal, including the absence
of a valid QDRO and the inapplicability of the Yiatchos
Doctrine.
(Goetz Mem. in Supp. [Dkt. 5] at 5; Goetz Reply [Dkt.
15] at 4-7.)
The Court agreed with the Goetz Defendants,
thereby permitting Mrs. Goetz to retain her benefits.
Thus, the
Goetz Defendants succeeded on the merits and are eligible for
attorneys’ fees.
Similarly, AERP sought to maintain the current
beneficiary designation in order to prevent reannuitization of
vested benefits.
To accomplish this, AERP argued that ERISA
precluded AERP from assigning benefits to Dahl (AERP Mem. in
Supp. [Dkt. 12] at 6-13), and that the Yiatchos Doctrine did not
apply (AERP Reply [Dkt. 19] at 8-9).
AERP.
The Court agreed with
Therefore, AERP, like the Goetz Defendants, achieved some
degree of success on the merits and is eligible to receive
attorneys’ fees.
The next step is to determine whether fees are
appropriate.
C.
Step 2: Appropriateness of Award of Attorneys’ Fees
District courts have discretion to award attorneys’
fees to an eligible party.
Williams, 609 F.3d at 635.
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In the
Fourth Circuit, five factors provide “general guidelines” to
inform the court’s exercise of discretion.
Id.
Those factors
are (1) degree of opposing party’s culpability or bad faith; (2)
ability of opposing party to satisfy an award of fees; (3) the
award’s deterrence of other persons acting under similar
circumstances; (4) “whether the parties requesting attorneys’
fees sought to benefit all participants and beneficiaries of an
ERISA plan or to resolve a significant legal question regarding
ERISA itself;” and (5) the relative merit of the parties’
positions.
Id. (quoting Quesinberry v. Life Ins. Co. of N.A.,
987 F.2d 1017, 1029 (4th Cir. 1993)).
The Court considers these
factors independent of the first step in the fee analysis, as
being eligible for attorneys’ fees does not create a presumption
in favor of fees.
Id.
The Court will apply those factors to each defendant
in turn.
1.
The Goetz Defendants
Applying the Quesinberry factors to the Goetz
Defendants, the Court declines to award attorneys’ fees.
Three
of the five factors weigh against an award of attorneys’ fees:
the lack of (1) bad faith; (2) a positive deterrent effect; and
(3) a benefit to plan participants.
The Court first turns to the bad-faith factor.
faith may be “evidenced by an intentional advancement of a
8
Bad
baseless contention . . . made for ulterior purposes,” Childers
v. MedStar Health, Inc., 289 F. Supp. 2d 714, 718 (D. Md. 2003),
but “mere negligence or error does not constitute bad faith,”
Wheeler v. Dynamic Eng’g, Inc., 62 F.3d 634, 641 (4th Cir.
1995).
The Goetz Defendants argue that Dahl exhibited bad
faith by pursuing a lawsuit that lacked any legal or factual
basis.
Specifically, they argue that under Fourth Circuit
precedent Dahl did not submit a QDRO and there was no legal or
factual support for a finding of fraud.
The Court, however,
finds that Dahl’s acts did not rise to the level of bad faith.
Dahl’s primary argument throughout this case was not
that she submitted a QDRO, but that the Yiatchos Doctrine should
extend to the QDRO process.
Although this Court ultimately
found that argument unavailing, the Court considers Dahl’s
argument as a good faith attempt to extend the law.
Dahl
supported her argument with citations to persuasive authority
and pursued reasonable, albeit unavailing, attempts to
distinguish Defendants’ supporting case law.
Though ultimately
unsuccessful, this argument to extend the law did not exceed the
bounds of zealous advocacy.
Turning to the deterrence factor, a fee award in this
case would not create any positive deterrent effect.
Deterrence
may counsel in favor of fees when those fees would discourage
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“other counsel from pursuing cases that are frivolous,
unreasonable, and without foundation.”
at 719.
Childers, 289 F. Supp.
When a claim arises from novel facts or legal theories,
however, a fee award would have little deterrent effect because
similar suits are unlikely.
See Matlock v. Pitney-Bowes, Inc.,
811 F. Supp. 2d 1186, 1191 (M.D.N.C. 2011) (finding little
deterrent effect of award because “facts of this case are very
unusual”).
Fees would provide only a minimal positive deterrent
effect here because the legal theories presented are not likely
to arise again.
Courts can resolve the typical ERISA benefit
dispute between ex-spouses with clear Fourth Circuit precedent.
Dahl’s argument for the application of the Yiatchos Doctrine,
however, appears novel without being frivolous or
foundationless.
As this case is currently on appeal, the Fourth
Circuit may have the opportunity to opine on the Yiatchos
Doctrine’s application to ERISA and a QDRO.
That potential
guidance from the Fourth Circuit, in addition to this Court’s
memorandum opinion, will communicate far more to future
litigants than an award of attorneys’ fees.
If the Fourth
Circuit agrees with this Court, future attempts to rely on the
Yiatchos doctrine are very unlikely.
Thus, any foreseeable
positive deterrent effect would be very minimal or nonexistent.
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At the same time, the Court is concerned about the
negative deterrent effects an award in this case may have.
When
applying the deterrence factor, “the Court may also consider the
remedial purposes of ERISA to protect employee rights and secure
effective access to federal courts.”
Ashley v. Prudential Ins.
Co. of Am., No. 3:10cv518-DWD, 2011 WL 2688977, at *5 (E.D. Va.
July 11, 2011) (quoting Quesinberry, 987 F.2d at 1029).
An
award in this case may threaten the goal of access to federal
courts by discouraging plaintiffs with valid, but untested,
claims from pursuing a potential remedy.
In such cases, it is
appropriate to give the deterrence factor “the greatest emphasis
and deference.”
Id. at *6.
Therefore, this factor weighs
heavily against awarding fees in this case.
The Goetz Defendants also did not seek to benefit all
plan participants or to resolve a significant legal question
regarding ERISA itself.
The Goetz Defendants defended this case
to retain the benefits that Mr. Goetz designated to his current
wife.
This goal is not ignoble, but it is not aimed at
benefitting all plan participants.
See Metro. Life Ins. Co. v.
Leich-Brannan, 812 F. Supp. 2d 729, 739 (E.D. Va. 2011) (factor
not weighing in favor of fee because party “sought only to
protect himself, his sister, and his step-mother, not a broader
class of beneficiaries”).
Additionally, there is no indication
the Goetz Defendants were motivated by resolving the question of
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the Yiatchos Doctrine’s application to ERISA or the QDRO
process.
In counterbalance to these three factors weighing
against an award of attorneys’ fees, two factors weigh in favor
of a fee award.
Those two factors, however, are insufficient to
tip the scale in the Goetz Defendants’ favor.
is Dahl’s apparent capacity to pay.
The first factor
Dahl has worked in the
aerospace engineering field for thirty-five years and currently
holds a senior level position at Booz Allen Hamilton.
(See
Goetz Mem. in Supp. [Dkt. 24] ¶ 11.; AERP Mem. in Supp. [Dkt.
26] at 6 (referencing Goetz’s memorandum).)
Additionally, Dahl
is the sole owner of a home assessed at $1.4 million and “is
believed to have significant retirement assets.”
(Goetz Mem. in
Supp. ¶ 11; AERP Mem. in Supp. at 6.)
Dahl did not refute these
facts in her memoranda in opposition.
Despite this apparent
capacity to pay, Dahl would likely have more difficulty bearing
these fees than would a corporation or business entity.
See
Quesinberry, 987 F.2d at 1030 n.17 (“Consideration of the second
factor should be undertaken with due regard for the type of
payor and the nature of the ERISA claim.”).
factor weighs only slightly in favor of fees.
Therefore, this
Yarde v. Pan Am.
Life Ins., No. 94-1167, 1995 WL 539736, at *13 (4th Cir. Sept.
12, 1995) (“The fact that Pan American is capable of paying an
attorney’s fee cannot, by itself, justify such an award.”).
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Lastly, the relative merits of the parties’ claims
weigh in favor of attorneys’ fees.
Dahl lost in her attempt to
prove she presented a QDRO or that the Yiatchos Doctrine
applies.
“To award attorneys’ fees largely on the basis of
Defendants’ stronger positions, however, would essentially turn
the test into a ‘prevailing party’ analysis, and there is no
such presumption in ERISA fee award determinations.”
Matlock v.
Pitney-Bowes, Inc., 811 F. Supp. 2d 1186, 1192 (M.D.N.C. 2011).
Therefore, this factor does not carry significant weight in this
case.
In conclusion, three factors weigh against attorneys’
fees as compared to two factors weighing in favor.
The
substance of the factors weighing against a fee, however, is
more important in this case than the quantity.
The absence of
bad faith, positive deterrent effect, or benefit to plan
beneficiaries weigh heavily against an award of attorneys’ fees.
Therefore, the Court will not grant attorneys’ fees for the
Goetz Defendants.
2.
Aerospace Employees’ Retirement Plan
Applying the Quesinberry factors to AERP is a closer
question, but yields the same outcome; fees are not appropriate
for AERP.
Notably, the absence of bad faith or deterrent effect
weighs against an award of attorneys’ fees.
The only factor to
weigh differently for AERP than the Goetz Defendants is the
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benefit to plan beneficiaries.
The addition of that factor to
the side favoring fees, however, does not lead the Court to find
fees appropriate.
As with the Goetz Defendants, the absence of bad faith
and the lack of a positive deterrent effect counsel against a
fee award.
It also bears repeating that a fee award in this
case could deter good-faith plaintiffs from pursuing their only
viable opportunity for relief, the federal courts.
These
factors weigh heavily against an award of attorneys’ fees.
The
three factors on the other side of the scale are (1) the benefit
to plan participants, (2) Dahl’s capacity to pay, and (3) the
relative strength of AERP’s position on the merits.
The Court
will focus on the benefit to plan participants, as that is the
only factor unique to AERP.
AERP argues that it was acting on behalf of plan
participants in its defense of this suit because substituting
beneficiaries would interfere with its planning and potentially
threaten participants’ access to benefits.
Additionally, AERP
argues that it could have been subject to suit if it acted
contrary to plan or ERISA by providing Dahl with the relief she
sought through her draft QDRO.
The Court finds this factor to weigh only slightly in
favor of a fee award because there is no indication how
burdensome a beneficiary change would be to the plan.
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Awarding
Dahl the relief she sought would substitute her one-hundred
percent annuity payment for Mrs. Goetz’s fifty-percent payment.
AERP acknowledged it has the technical capacity to change
beneficiaries, but lacked the legal authority to do so.
Mem. Reply to Mot. to Dismiss [Dkt. 19] at 10.)
(AERP
It is
questionable how much the plan participants as a whole benefit
by preventing a beneficiary change in this case.
In conclusion, the three factors supporting an award
of attorneys’ fees for AERP are not compelling here.
By
contrast, the absence of bad faith and the risk of deterring
good-faith plaintiffs from seeking relief through the federal
courts weigh strongly against a fee award.
Therefore, the Court
will not award fees to AERP.
IV. Conclusion
For the foregoing reasons, the Court will deny the
Goetz Defendants and AERP’s Motions for Attorneys’ Fees.
An
appropriate order will issue.
December 1, 2015
Alexandria, Virginia
/s/
James C. Cacheris
UNITED STATES DISTRICT COURT JUDGE
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