Critelli v. Fidelity Nat. Title Ins. Co. of N.Y., 05-CV-371 (NGG)(AKT).

• Decision Date: 24 March 2008
• Docket Number: No. 05-CV-371 (NGG)(AKT).,05-CV-371 (NGG)(AKT).
• Citation: 554 F.Supp.2d 360
• Parties: Steven CRITELLI, Plaintiff, v. FIDELITY NATIONAL TITLE INSURANCE COMPANY OF NEW YORK, Defendant.
• Court: U.S. District Court — Eastern District of New York

554 F.Supp.2d 360

Steven CRITELLI, Plaintiff, v. FIDELITY NATIONAL TITLE INSURANCE COMPANY OF NEW YORK, Defendant.

No. 05-CV-371 (NGG)(AKT).

United States District Court, E.D. New York.

March 24, 2008.

Gerald Dandendeau, Bart & Schwartz, LLP, Gerald V. Dandeneau, One Huntington Quadrangle, Melville, NY, for Plaintiff.

Andrew P. Marks, Littler Mendelson, P.C., New York, NY, for Defendant.

MEMORANDUM AND ORDER

NICHOLAS G. GARAUFIS, District Judge.

Plaintiff Steven Critelli ("Critelli" or "Plaintiff") brought this action under Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001 et. seq. ("ERISA"), against his former employer, Fidelity National Title Insurance Company of New York ("Fidelity" or "Defendant"), to collect a bonus that Plaintiff claimed Fidelity owed him in recognition of his service during the final year of his employment. Fidelity moved for summary judgment under Rule 56 of the Federal Rules of Civil Procedure on the ground that Critelli was not a participant in any employee benefit plan governed by ERISA. By Memorandum & Order dated March 7, 2007, the court granted Defendant's motion for summary judgment and directed the Clerk of Court to close the case.

Defendant moved for an award of attorney's fees in the amount of $51,000, pursuant to 29 U.S.C. § 1132(g)(1), ERISA's attorney's fee provision. This matter was referred to Magistrate Judge A. Kathleen Tomlinson for a Report & Recommendation ("R & R") on September 27, 2007. In the R & R, dated March 5, 2008, Magistrate Judge Tomlinson recommended that the court find that Plaintiffs arguments were not frivolous or made in bad faith, that "the factors taken as a whole here do not support an award of attorney's fees to Fidelity," and that the court deny an award of attorney's fees. (R & R at 13.) Defendant has failed to file any objections to the R & R within the prescribed ten-day period.

After examining the record, I have determined that the R & R is not subject to attack for plain error or manifest injustice. See, e.g., Pizarro v. Bartlett, 776 F.Supp. 815 (S.D.N.Y.1991). The court finds Magistrate Judge Tomlinson's opinion to be thoughtful and thorough; her recommendation that an award of attorney's fees be denied is well reasoned based on the facts of this case and is well founded in applicable law. Accordingly, this court adopts Magistrate Judge Tomlinson's R & R for the reasons stated therein.

For the reasons described above, the court hereby orders that Defendant's motion for an award of attorney's fees is denied.

SO ORDERED.

REPORT AND RECOMMENDATION

A. KATHLEEN TOMLINSON, United States Magistrate Judge.

I. PROCEDURAL SETTING

Plaintiff brought the instant litigation alleging that his employer's Deferred Compensation Plan for managerial employees, which provided him with an option of deferring payment of a portion of his salary and up to 100% of his annual bonus, constituted an "employee benefit" that is protected under the Employee Retirement Income Security Act ("ERISA"). According to Plaintiff, the Defendant employer unjustifiably withheld the bonus when Plaintiff left his employment.

In a Memorandum Decision & Order, Judge Garaufis granted the Defendant's motion for summary judgment, pursuant to Fed.R.Civ.P. 56, finding that (1) the bonus was computed on the basis of the Defendant employer's pre-tax profits designed to serve as an incentive rather than to provide "retirement income;" (2) the employer provided only an option to defer the bonus and the bonus was not automatically transferred to the Deferred Compensation Plan; and (3) the bonus was paid solely at the discretion of the employer, with the right to exclude those no longer employed at the company at the time the bonus is disbursed. See DE 25 at 6-7. Given these facts, Judge Garaufis found that the practice of paying bonuses in this manner did not qualify as an employee benefit plan covered by ERISA. Id. at 7.

Defendant has now moved for an award of attorney's fees in the amount of $51,000, relying upon 29 U.S.C. § 1132(g)(1), the ERISA attorney's fee provision. This motion for attorney's fees has been referred to me by Judge Garaufis for a Report and Recommendation.

II. THE APPLICABLE STANDARD

An application for attorney's fees in an ERISA case is governed by 29 U.S.C. § 1132(g)(1), which provides in pertinent part that

(1) 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.

ERISA therefore provides that attorney's fees and costs can be awarded to either party. See Seitzman v. Sun Life Assurance Co. of Can., Inc., 311 F.3d 477, 482 (2d Cir.2002) (citing Miller v. United Welfare Fund, 72 F.3d 1066, 1074 (2d Cir. 1995)). The decision whether to award fees lies within the discretion of the district court, see Chambless v. Masters, Mates & Pilots Pension Plan, 815 F.2d 869, 871 (2d Cir.1987); Fase v. Seafarers Welfare & Pension Plan, 589 F.2d 112, 116 (2d Cir.1978), and is reviewed on an abuse of discretion standard, see Jones v. UNUM Life Ins. Co. of Am., 223 F.3d 130, 138 (2d Cir.2000).

In making a determination whether to award attorney's fees in an ERISA case, courts in this Circuit have relied upon the five-part test set forth in Chambless v. Masters, Mates & Pilots Pension Plan, 815 F.2d at 871. The Chambless factors, as they have come to be known, require a court to consider the following issues in evaluating an application for attorney's fees in an ERISA case: "(1) the degree of the offending party's culpability or bad faith, (2) the ability of the offending party to satisfy an award of attorney's fees, (3) whether an award of fees would deter other persons from acting similarly under like circumstances, (4) the relative merits of the parties' positions, and (5) whether the action conferred a common benefit on a group of pension plan participants." Id. (citing Ford v. N.Y. Cent. Teamsters Pension Fund, 506 F.Supp. 180, 183 (W.D.N.Y.1980), aff'd, 642 F.2d 664 (2d Cir.1981)). The test enunciated in Chambless takes into account the "relative merits of the parties' positions and also requires findings about bad faith." Id. at 872. The Court must now consider each of these factors to determine whether Defendant has satisfied each element and whether it is entitled to an award of attorney's fees.

III. DISCUSSION

In applying the five-factor test, the Court is mindful of its obligation to liberally construe the ERISA attorney's fee provisions to "protect the statutory purpose of vindicating retirement rights." Chambless, 815 F.2d at 872. The Second Circuit has observed that the five-factor test "provides sufficient latitude to review a fee request by allowing courts to consider which party is requesting fees, assess the relative culpability of the parties and address the potential deleterious effect of a fee award." Anita Founds., Inc. v. ILGWU Nat'l Ret. Fund, 902 F.2d 185, 189 (2d Cir.1990). The Chambless test applies to both plaintiffs and defendants in ERISA actions. Chambless, 815 F.2d at 872. However, a number of courts that have evaluated the five factors have concluded that they "very frequently suggest that attorney's fees should not be charged against ERISA plaintiffs." West v. Greyhound Corp. 813 F.2d 951, 955 (9th Cir. 1987); Gray v. New Eng. Tel. & Tel. Co., 792 F.2d 251, 259 (1st Cir.1986). The Second Circuit has commented upon and utilized this approach:

For example, courts have found that the "culpability" of a losing plaintiff "significantly differs" from that of a losing defendant: "A losing defendant must have violated ERISA, thereby depriving plaintiffs of rights under a pension plan and violating a congressional mandate. A losing plaintiff, on the other hand, will not necessarily be found `culpable,' but may be only in error or unable to prove his case."

Salovaara v. Eckert, 222 F.3d 19, 28 (2d Cir.2000) (quoting Marquardt v. N. Am. Car Corp., 652 F.2d 715, 720 (7th Cir. 1981)). Moreover, the Court of Appeals has noted that a decision to grant attorney's fees, although "uniquely within the province of a district court" must be "made with restraint and discretion." Schlaifer Nance & Co. v. Estate of Warhol, 194 F.3d 323, 334 (2d Cir.1999).

A. Offending Party's Culpability or Bad Faith

An affirmation submitted by Defendant Fidelity here states that the employer incurred $60,217 in legal fees in the defense of this action, see Aff. of Andrew P. Marks, Esq. in Supp. of Def.'s Mot. for Attorneys' Fees, ¶ 2¹—an action Defendant claims was essentially frivolous. See Def.'s Mem. of Law in Supp. of its Mot. for Attorney's Fees, at 4.² Defendant argues that it has met its burden of demonstrating "bad faith."

This first factor regarding "bad faith" is generally the most significant to the overall determination whether a defendant should be awarded attorney's fees in an ERISA setting. According to Defendant Fidelity, Plaintiff adopted a litigation strategy which itself is evidence of bad faith. The Complaint sets forth two causes of action—the first claim for relief is fashioned as an ERISA violation for failure to pay Plaintiff his 2004 bonus in accordance with the Defendant's "bonus compensation plan." Compl. ¶¶ 12, 14. The second'claim is asserted for attorney's fees as provided for in § 1132(g)(1). Id. ¶ 16.

As to both claims, Defendant argues that Plaintiff knew he could not prevail on a state law claim for breach of contract because there was no dispute that payment of a bonus to terminated employees was within the sole discretion of the Defendant as the employer. Def.'s Mem. of Law at 1. In order to avoid such an outcome, Defendant maintains, Plaintiff creatively attempted to latch on to the ERISA statute to claim that he was denied benefits due him under the terms of the employer's "compensation plan." or "bonus compensation plan." Defenda...