Mahoney v. J.J. Weiser & Co.

• Decision Date: 18 August 2009
• Docket Number: No. 04 Civ. 2592(VM).,04 Civ. 2592(VM).
• Parties: James MAHONEY, as Director of the Transport Workers Union Local 100 Retirees' Association, and Plan Administrator of the Transport Workers Union Local 100 Retirees' Association Benefit Plan, et al., Plaintiffs, v. J.J. WEISER & COMPANY, Inc., et al., Defendants.
• Court: U.S. District Court — Southern District of New York

646 F.Supp.2d 582

James MAHONEY, as Director of the Transport Workers Union Local 100 Retirees' Association, and Plan Administrator of the Transport Workers Union Local 100 Retirees' Association Benefit Plan, et al., Plaintiffs, v. J.J. WEISER & COMPANY, Inc., et al., Defendants.

No. 04 Civ. 2592(VM).

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

August 18, 2009.

COPYRIGHT MATERIAL OMITTED

Susan Marie Jennik, William G. Schimmel, Thomas Martin Kennedy, Kennedy, Jennik & Murray, P.C., New York, NY, for Plaintiffs.

Daniel Glenn Ecker, Michael L. Hart, Jonathan Robert Harwood, Traub Lieberman Straus & Shrewsberry LLP, Hawthorne, NY, Jack Babchik, Brian Thomas Carr, Babchik & Young LLP, White Plains, NY, Suzanne Tongring, Tongring Law Offices, New York, NY, for Defendants.

DECISION AND ORDER

VICTOR MARRERO, District Judge.

I. BACKGROUND

Defendants Michael J. Fitzpatrick and John Meehan (collectively, "Defendants") filed a motion seeking an award of attorney's fees from plaintiffs in this action pursuant to the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C § 1132(g)(1) (" § 1132(g)(1)"). By Order dated July 31, 2009, Magistrate Judge Henry B. Pitman, to whom this matter had been referred, issued a Report and Recommendation (the "Report"), a copy of which is attached and incorporated herein, recommending that Defendants' motion be denied in all respects. Defendants filed timely objections to the Report challenging its factual findings and legal conclusions. For the reasons stated below, the Court denies Defendants' motion in its entirety.

II. STANDARD OF REVIEW

Where a party "makes a specific written objection . . . after being served with a copy of [a magistrate judge's] recommended disposition, . . . the district court is required to make a de novo determination regarding those parts of the report." Cespedes v. Coughlin, 956 F.Supp. 454, 463 (S.D.N.Y.1997) (quotation marks omitted) (citing United States v. Raddatz, 447 U.S. 667, 676, 100 S.Ct. 2406, 65 L.Ed.2d 424 (1980)); see also Fed.R.Civ.P. 72(b); Thomas v. Arn, 474 U.S. 140, 149, 106 S.Ct. 466, 88 L.Ed.2d 435 (1985). The Court is not required to review any portion of a Magistrate Judge's report that is not the subject of an objection. See Thomas, 474 U.S. at 149, 106 S.Ct. 466. A district judge may accept, set aside, or modify, in whole or in part, the findings and recommendations of the Magistrate Judge. See Fed.R.Civ.P. 72(b); DeLuca v. Lord, 858 F.Supp. 1330, 1345 (S.D.N.Y.1994).

III. DISCUSSION

Having conducted a de novo review of the full factual record in this litigation, including the pleadings, and the parties' respective papers submitted in connection with the underlying motion and in this proceeding, as well as the Report and applicable legal authorities, the Court concludes that denial of Defendants' motion, for substantially the reasons set forth in the Report, is warranted.

In recommending denial of Defendants' motion, Magistrate Judge Pitman applied the five-factor test enunciated by the Second Circuit in Chambless v. Masters, Mates & Pilots Pension Plan, 815 F.2d 869 (2d Cir.1987), to guide the courts' inquiry in evaluating applications for attorney's fees pursuant to § 1132(g)(1), whether the prevailing party is the plaintiff or defendant. Those considerations are:

(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. at 871.

The Report properly notes authority in this Circuit cautioning that, other than in exceptional circumstances, in order not to discourage lawsuits by ERISA beneficiaries asserting in good faith their rights under employee benefit plans, the Chambless factors ordinarily balance against awarding recovery of attorney's fees to prevailing defendants. See Anita Founds., Inc. v. ILGWU Nat'l Ret. Fund, 902 F.2d 185, 188-89 (2d Cir.1990).

Defendants contend that the Report focuses improperly on cases in which plan participants alone served as plaintiffs, and not on cases where plan fiduciaries and participants were recruited to serve as plaintiffs. They also challenge the Report's analysis and application of the first, third and fourth Chambless factors. Finally, Defendants object that the Report did not take into account the burden placed on them to defend this litigation in the district and appellate courts, and did not address their entitlement to attorney's fees for defending on appeal.¹ The Court has considered these arguments and rejects them.

The Court is not persuaded that, for the purposes of awarding attorney's fees to prevailing defendants pursuant to § 1132(g)(1), it makes a material difference whether plaintiffs in an ERISA action consist solely of plan participants or plan fiduciaries and participants. The Court finds no authority supporting such a distinction, and Defendants have not cited any.

With regard to the Report's Chambless factors, the Court rejects Defendants' challenges. As to the first factor, though Defendants ultimately prevailed on the merits of their position in this Court and on appeal, under the circumstances that gave rise to the action at the time it was filed, there is no sufficient evidence of culpability or bad faith on Plaintiffs' part in commencing the litigation. Concerning the need for deterrence reflected in the third factor, the Court agrees that given ERISA's policy of protecting plan beneficiaries, colorable claims pursued in good faith, even if ultimately unsuccessful, should not be discouraged by awards of attorney's fees to prevailing defendants. See Seitzman v. Sun Life Assurance Co. of Canada, Inc., 311 F.3d 477, 485 (2d Cir. 2002); Salovaara v. Eckert, 222 F.3d 19, 31 (2d Cir.2000).

As regards the fourth factor, the relative merits of the parties' positions, though Defendants' arguments prevailed, Plaintiffs' losing claims should be considered in the context of the absence of culpability or bad faith as determined in assessing the first factor. See Sewell v. 1199 Nat'l Benefit Fund for Health & Human Servs., No. 04 Civ. 4474, 2007 WL 1434952, at *1 (S.D.N.Y. May 15, 2007). In this light, the Court finds that Plaintiffs' position cannot be considered so substantially devoid of merit as to tip the Chambless factors dispositively in Defendants' favor on this basis alone.

Defendants contend that the Report does not consider the burden they encountered in defending this litigation, which they argue balances the third, fourth and fifth Chambless factors in their favor. The Court has examined this objection and is not persuaded. This argument may be compelling in a case showing evidence of intentional misconduct, or sufficient culpability or bad faith, which the Court finds absent here.

Finally, Defendants object that the Report does not consider their entitlement to recovery of attorney's fees in connection with their appeal. However, there is no record that that matter was before Magistrate Judge Pitman, as the Circuit Court's ruling in this case was not rendered until shortly before the issuance of the Report, and thus no formal application for attorney's fees in that regard has been filed.

IV. ORDER

For the reasons discussed above, it is hereby

ORDERED that upon consideration of the Report and Recommendation of Magistrate Judge Henry Pitman dated July 31, 2009 (Docket No. 155), substantially for the reasons discussed therein, the objections (Docket No. 156) of defendants Michael J. Fitzpatrick and John Meehan ("Defendants") are rejected and Defendants' motion for an award of attorney's fees and costs in this action is DENIED.

SO ORDERED.

REPORT AND RECOMMENDATION

PITMAN, United States Magistrate Judge.

TO THE HONORABLE VICTOR MARRERO, United States District Judge,

I. Introduction

Defendants Michael J. Fitzpatrick and John Meehan move for an award of attorneys' fees in this ERISA action, pursuant to 29 U.S.C. § 1132(g)(1) (Docket Item 132). For the reasons set forth below, I respectfully recommend that Fitzpatrick and Meehan's motion be denied in all respects.

II. Facts

A. Facts Underlying Plaintiffs' Claims

The facts relevant to the disposition of this motion are set forth in two opinions addressing the merits of the plaintiffs' claims that were issued by the Honorable Michael B. Mukasey, United States District Judge (now retired) and the Honorable Victor Marrero, United States District Judge. Mahoney v. JJ Weiser & Co., 564 F.Supp.2d 248 (S.D.N.Y.2008), aff'd, No. 08-3634-cv, ___ Fed.Appx. ___, 2009 WL 2243862 (2d Cir. July 28, 2009); Toussaint v. JJ Weiser & Co., 04 Civ. 2592(MBM), 2005 WL 356834 (S.D.N.Y. Feb. 13, 2005). Although familiarity with these decisions is assumed, I shall summarize the facts to the extent necessary for an understanding of the disposition I recommend.

Plaintiff Mahoney is the Director of the Transport Workers Union Local 100 Retirees Association (the "Retirees Association") and Plan Administrator of the Transport Workers Union Local 100 Retirees Association Benefit Plan. The remaining plaintiffs are participants in a health benefits plan (the "Plan") open to members of the Retirees Association.

Defendant JJ Weiser & Co. ("Weiser") is a plan administrator and insurance brokerage firm; it assisted in the issuance of the Plan. Defendants Cohen and Gluck are the former and current presidents of Weiser, respectively. Defendant Fitzpatrick was the director of the Retirees Association from 2000 through October 2002. Defendant Meehan was the director of the Retirees Association from 1990 through 2000.

Plaintiffs allege, among other things, that defendants breached their fiduciary duties to the Plan and engaged in prohibited transactions, all in violation of the Employee...