Ford v. Uniroyal Pension Plan

• Decision Date: 04 September 1998
• Docket Number: No. 94-2080,94-2080
• Parties: 22 Employee Benefits Cas. 1681, Pens. Plan Guide (CCH) P 23947C Isaac FORD, et al., Plaintiffs-Appellants, v. UNIROYAL PENSION PLAN, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 613

154 F.3d 613

22 Employee Benefits Cas. 1681,

Pens. Plan Guide (CCH) P 23947C

Isaac FORD, et al., Plaintiffs-Appellants, v. UNIROYAL PENSION PLAN, Defendant-Appellee.

No. 94-2080.

United States Court of Appeals, Sixth Circuit.

Argued June 15, 1998.

Decided Sept. 4, 1998.

Doyle G. O'Connor (argued and briefed), Steinberg, O'Connor & Burns, Detroit, MI, for Plaintiffs-Appellants.

Donald H. Scharg (argued and briefed), Thomas A. Pinch (briefed), The Fishman Group, Bloomfield Hills, MI, for Defendant-Appellee.

Before: WELLFORD, MOORE, and CLAY, Circuit Judges.

OPINION

MOORE, Circuit Judge.

We consider in this appeal whether the federal courts must incorporate state law as the federal rule of decision with respect to the calculation of prejudgment interest and attorney fees awarded to prevailing plaintiffs in a civil enforcement action under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1132. The plaintiffs argue that the district court erred when it rejected their request that the court calculate prejudgment interest and reasonable attorney fees in accordance with Michigan law. Because prejudgment interest and attorney fee awards are not issues primarily of state concern, and because application of Michigan law in this case would frustrate ERISA's remedial scheme, we hold that the district court was not required to look to state law. Accordingly, we affirm the district court's calculation of the prejudgment interest and attorney fees awarded in this matter.

I. FACTS AND PROCEDURAL HISTORY

The long and tortuous history of this case began in 1984, when the plaintiffs filed suit under ERISA against the defendant, Uniroyal Pension Plan, Board of Benefits and Awards ("Uniroyal"), for disability retirement benefits owed them under the Uniroyal Retirement Plan (the "Plan"). ¹ The plaintiffs were employees at the now-defunct Uniroyal Tire Plant in Detroit, which was closed in July of 1981. After the plant's closing, the plaintiffs applied for disability pension benefits under the Plan. Uniroyal denied their applications, and this litigation ensued. In 1990, the district court granted summary judgment in favor of the plaintiffs on their claim for disability benefits under the Plan. J.A. at 88-104 (Dist. Ct. Order 5/29/90); 105-07 (Dist. Ct. Order 8/20/90). The district court also granted the plaintiffs' request for attorney fees under ERISA, 29 U.S.C. § 1132(g)(1), as well as their request for prejudgment interest, after determining that the defendant had engaged in a pattern of bad faith, "as evidenced by (1) the imposition of sanctions upon the Defendant for having misled [the district court] and the arbitrator, (2) wasting the time of the Plaintiffs and the arbitrator by objecting to arbitration after stipulating to it before this Court, and (3) denying the Plaintiff's [sic] applications for pensions because of 'arbitrary and capricious' reasons when there was no medical dispute that they were entitled to disability benefits." J.A. at 106-07 (Dist. Ct. Order 8/20/90). Although the district court had previously sanctioned the defendant, it declined to levy additional Rule 11 sanctions against the defendant after concluding that additional sanctions were unwarranted. See id. The Sixth Circuit affirmed the district court's order on appeal, including the decision to award attorney fees and prejudgment interest. See Kennedy v. Uniroyal Pension Plan, Nos. 90-1705/1983/2048/2110, 937 F.2d 608 (Table), 1997 WL 134613 (6th Cir.1991).

After the Sixth Circuit affirmed the order granting the plaintiffs' motion for summary judgment, attorney fees, and prejudgment interest, the district court commenced proceedings in order to calculate the amount of prejudgment interest and attorney fees to which the plaintiffs were entitled. ERISA does not prescribe the applicable prejudgment interest rate or the method by which the district courts should calculate reasonable attorney fees. The district court rejected the plaintiffs' invitation to look to state law for the applicable prejudgment interest rate and the calculation of attorney fees. Relying on the recommendations of the magistrate judge, the district court awarded the plaintiffs reasonable attorney fees plus postjudgment interest. The district court adopted the defendant's calculation of the prejudgment interest on the benefits wrongly withheld from the plaintiffs, which utilized a 9% annual interest rate. Declining to award the plaintiffs their future monthly benefits in a lump sum, the district court instead directed Uniroyal to continue payment of monthly pensions as they became due in accordance with the Plan. The district court also declined to award the plaintiffs prejudgment interest on the present value of future benefits. J.A. at 67-68 (Am. Supp. Post-J. Order at 3-4). This appeal ensued.

II. ANALYSIS

On appeal, the plaintiffs challenge the district court's calculations of prejudgment interest and reasonable attorney fees. Specifically, the plaintiffs assert that because ERISA is silent with respect to prejudgment interest awards and the method by which the federal courts should calculate attorney fees, the federal courts must look to state law in determining the applicable prejudgment interest rate and the method by which to calculate reasonable attorney fees. We disagree, and hold that the district court was not required to incorporate state law as the federal rule of decision on these matters.

A. Prejudgment Interest

Although ERISA does not mandate the award of prejudgment interest to prevailing plan participants, we have long recognized that the district court may do so at its discretion in accordance with general equitable principles. ² See Wells v. United States Steel, Carnegie Pension Fund, 76 F.3d 731, 737 (6th Cir.1996); Tiemeyer v. Community Mut. Ins. Co., 8 F.3d 1094, 1102 (6th Cir.1993), cert. denied, 511 U.S. 1005, 114 S.Ct. 1371, 128 L.Ed.2d 48 (1994). In calculating the prejudgment interest, the district court declined the plaintiff's invitation to utilize the 12% prejudgment interest rate mandated under Michigan law, MICH. COMP. LAWS ANN. § 600.6013 (West 1987 & Supp.1998), but instead adopted a 9% rate at the recommendation of the magistrate judge, who arrived at that rate by looking to the average interest rate of 52-week United States Treasury bills for the relevant period. On appeal, we must determine whether the district court abused its discretion in utilizing the 9% prejudgment interest rate rather than the state prejudgment interest rate of 12%.

Although any common law rule necessary to effectuate a federal statutory right is inherently federal in character, "[i]t does not follow ... that the content of such a rule must be wholly the product of a federal court's own devising." Kamen v. Kemper Fin. Servs., Inc., 500 U.S. 90, 97-98, 111 S.Ct. 1711, 114 L.Ed.2d 152 (1991). Rather, when a federal statute is silent on a particular matter, the federal courts often incorporate state law as the federal rule of decision. See id. at 98, 111 S.Ct. 1711; Columbia Gas Transmission Corp. v. Exclusive Natural Gas Storage Easement, 962 F.2d 1192, 1195-96 (6th Cir.), cert. denied, 506 U.S. 1022, 113 S.Ct. 659, 121 L.Ed.2d 585 (1992). However, the federal courts may properly devise a uniform federal common law when "the scheme in question evidences a distinct need for nationwide legal standards, or when express provisions in analogous statutory schemes embody congressional policy choices readily applicable to the matter at hand, ... [or when] application of [the particular] state law [in question] would frustrate specific objectives of the federal programs." Kamen, 500 U.S. at 98, 111 S.Ct. 1711 (citations and quotations omitted). "Thus, normally, when courts decide to fashion rules of federal common law, 'the guiding principle is that a significant conflict between some federal policy or interest and the use of state law ... must first be specifically shown.' " Atherton v. FDIC, 519 U.S. 213, ----, 117 S.Ct. 666, 670, 136 L.Ed.2d 656 (1997) (quoting Wallis v. Pan Am. Petroleum Corp., 384 U.S. 63, 68, 86 S.Ct. 1301, 16 L.Ed.2d 369 (1966)) (alteration in original).

Our review of Supreme Court precedent suggests a strong inclination to adopt state law as the federal rule of decision when the federal statute is silent on a matter traditionally of state concern. This inclination, grounded in federalism, reflects the principle that the federal courts may not intrude into the traditional domains of the states absent authorization from Congress. See Thomas W. Merrill, The Common Law Powers of Federal Courts, 52 U. CHI. L.REV. 1, 15-18 (1985); cf. Atherton, 117 S.Ct. at 670 ("Whether latent federal power should be exercised to displace state law is primarily a decision for Congress, not the federal courts." (quotation omitted)). For example, in De Sylva v. Ballentine, 351 U.S. 570, 76 S.Ct. 974, 100 L.Ed. 1415 (1956), the Court was faced with determining whether an illegitimate child was included within the term "children" as used in the Copyright Act, 17 U.S.C. § 24. The Court looked to "the ready-made body of state law" to define the term "children" after recognizing that there does not exist a federal law of domestic relations and that domestic relations is "primarily a matter of state concern." Id. at 580, 76 S.Ct. 974. Similarly, the Kamen Court looked to state law to determine the allocation of governing power in corporations because corporations "are creatures of state law," and parties expect that corporate relationships will be governed by state-law standards. See Kamen, 500 U.S. at 98-99, 111 S.Ct. 1711; see also Atherton, 117 S.Ct. at 670 (standard of care under Financial Institutions Reform, Recovery, and Enforcement Act ("FIRREA"), 12 U.S.C. § 1821, governing officers and directors of federally insured savings institutions must be defined by state law because state law traditionally governs corporate standards); ...