Smith v. CMTA-IAM Pension Trust

• Decision Date: 02 November 1984
• Docket Number: CMTA-IAM,No. 83-1792,83-1792
• Citation: 746 F.2d 587
• Parties: 5 Employee Benefits Ca 2428 Don Ray SMITH, Plaintiff-Appellant, v.PENSION TRUST, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 587

746 F.2d 587

5 Employee Benefits Ca 2428

Don Ray SMITH, Plaintiff-Appellant, v. CMTA-IAM PENSION TRUST, et al., Defendants-Appellees.

No. 83-1792.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Feb. 15, 1984.

Decided Nov. 2, 1984.

Stanley T. Grydyk, Grydyk & Pierce, Richmond, Cal., for plaintiff-appellant.

Richard C. Johnson, Warren H. Saltzman, Saltzman & Johnson, San Francisco, Cal., for defendants-appellees.

Appeal from the United States District Court for the Northern District of California.

Before WALLACE, FLETCHER and FERGUSON, Circuit Judges.

FERGUSON, Circuit Judge:

This case is before the court to review the district court's denial of plaintiff's motion for attorney's fees under section 502(g)(1) of the Employee Retirement Income and Security Act (ERISA), 29 U.S.C. Sec. 1132(g)(1). We hold that the district court abused its discretion in denying fees and therefore reverse and remand.

The plaintiff, Don Ray Smith, brought this action against the CMTA-IAM Pension Trust to recover benefits which he claimed had been wrongfully withheld for a period of over 3 1/2 years. Smith represented himself until faced with the trust's motion to dismiss or for summary judgment, and for fees. He then hired counsel, but the district court dismissed Smith's action with prejudice nevertheless. On appeal this court affirmed in part and reversed in part. Smith v. CMTA-IAM Pension Trust, 654 F.2d 650 (9th Cir.1981). Upon remand, the parties settled. Included in the settlement agreement was the following paragraph:

C. The parties hereto will seek to reach an agreement concerning the payment of attorney's fees for Don Ray Smith. In the event of a failure by the parties to reach such an agreement, Don Ray Smith or his attorney may petition the Court for said fees. Failure of the parties to reach an agreement concerning attorney's fees shall not have any effect upon the finality of this settlement agreement.

The parties could not agree on the payment of plaintiff's attorney's fees, and Smith moved for fees before the district court pursuant to 29 U.S.C. Sec. 1132(g)(1). His motion was denied and he appeals. Smith also seeks fees and costs for this appeal.

ERISA provides that "the court in its discretion may allow a reasonable attorney's fee and costs of action to either party." Sec. 502(g)(1), 29 U.S.C. Sec. 1132(g)(1). A decision denying fees will be set aside if the district court (1) abused its discretion, Hummell v. S.E. Rykoff & Co., 634 F.2d 446, 452 (9th Cir.1980); (2) failed to state the reasons for its decision, id. at 452-53; or (3) used incorrect legal standards to reach its decision. Lummi Indian Tribe v. Oltman, 720 F.2d 1124, 1125 (9th Cir.1983). If the district court fails to state the reasons for its decision a remand for a statement of reasons may be necessary. Hummell, 634 F.2d at 452-53.

In support of its decision, the district court recited the factors this court listed in Hummell, 634 F.2d at 453, as necessary to consider when a motion for attorney's fees under ERISA is denied. We hold that the district court abused its discretion, however, by misapplying the factors.

ERISA, like the Civil Rights Acts of 1871 and 1964, and the Labor-Management Reporting and Disclosure Act, is remedial legislation which should be liberally construed in favor of protecting participants in employee benefits plans. Section 502(g)(1), 29 U.S.C. Sec. 1132(g)(1), authorizes the court to award attorney fees. This section "should be read broadly to mean that a plan participant or beneficiary, if he prevails in his suit under Sec. 1132 to enforce his rights under his plan, 'should ordinarily recover an attorney's fee unless special circumstances would render such an award unjust.' " Landro v. Glendenning Motorways, Inc., 625 F.2d 1344, 1356 (8th Cir.1980) (quoting Newman v. Piggie Park Enterprises, 390 U.S. 400, 402, 88 S.Ct. 964, 966, 19 L.Ed.2d 1263 (1968)).

As in cases involving section 1988 awards, see Hensley v. Eckerhart, 461 U.S. 424, 103 S.Ct. 1933, 76 L.Ed.2d 40, a district court considering a motion for attorney's fees under ERISA should apply its discretion consistent with the purposes of ERISA, those purposes being to protect employee rights and to secure effective access to federal courts. See 29 U.S.C. Sec. 1001(b); S.Rep. No. 93-127, reprinted in 1974 U.S.Code Cong. & Ad.News, 4639, 4838, 4871. As a general rule, ERISA employee plaintiffs should be entitled to a reasonable attorney's fee "if they succeed on any significant issue in litigation which achieves some of the benefit the parties sought in bringing suit." Hensley v. Eckerhart, 461 U.S. at ----, 103 S.Ct. at 1939, 76 L.Ed.2d at 50 (quoting Nadeau v. Helgemoe, 581 F.2d 275, 278-79 (1st Cir.1978)). See Lummi Indian Tribe, 720 F.2d at 1125. See also Central States Southeast v. Hitchings Trucking, 492 F.Supp. 906, 909 (E.D.Mich.1980).

In this case although the district court used the five factors listed in Hummell, 634 F.2d at 453, it did not have the remedial purposes of ERISA in mind. The underlying purposes of ERISA are to protect the interests of participants in employee benefit plans. An important aspect of that protection is to afford them effective access to federal courts. 29 U.S.C. Sec. 1001(b).

The five Hummell factors are:

(1) the degree of the opposing parties' culpability or bad faith; (2) the ability of the opposing parties to satisfy an award of fees; (3) whether an award of fees against the opposing parties would deter others from acting in similar circumstances; (4) whether the parties requesting fees sought to benefit all participants and beneficiaries of an ERISA plan or to resolve a significant legal question regarding ERISA; and (5) the relative merits of the parties' positions.

Hummell v. S.E. Rykoff & Co., 634 F.2d at 453. "No one of the Hummell factors, however, is necessarily decisive, and some may not be pertinent in a given case." Carpenters Southern California Administrative Corp. v. Russell, 726 F.2d 1410, 1416 (9th Cir.1984).

In considering these factors to justify a failure to award fees to Smith, a prevailing employee participant, the district court stated that "one of the main prerequisites is that there's bad faith." Although bad faith is a factor that would always justify an award, it is not required. As there was no bad faith on either side, this factor should not have been considered decisive. The relative ability of the parties to satisfy an award of fees is, however, relevant. Generally, when an employee participant brings suit under ERISA, whether it is against the trustees or the employer, the resources available to the pensioner are limited. Cf. Marquardt v. North America Car Corp., 652 F.2d 715, 718-19 (7th Cir.1981). As the Supreme Court said in Hall v. Cole, 412 U.S. 1, 13, 93 S.Ct. 1943, 1950, 36 L.Ed.2d 702 (1973), a case involving attorney's fees under the Labor-Management Reporting and Disclosure Act, 29 U.S.C. Sec. 401 et seq.:

"Not to award counsel fees in cases such as this would be tantamount to repealing the Act itself by frustrating its basic purpose. It is difficult for individual members of labor unions to stand up and fight those who are in charge. The latter have the treasury of the union at their command and the paid union counsel at their beck and call while the member is on his own.... An individual union member could not carry such a heavy financial burden. Without counsel fees the grant of federal jurisdiction is but a gesture for few union members could avail themselves of it." 462 F.2d, at 780-781.

412 U.S. at 13, 93 S.Ct. at 1950 (quoting Cole v. Hall, 462 F.2d 777, 780-81 (2d Cir.1972)). Based on this factor alone, absent special circumstances, a prevailing ERISA employee plaintiff should ordinarily receive attorney's fees from the defendant.

Consideration of the other three factors also leads to the conclusion that prevailing employee plaintiffs should ordinarily recover attorney's fees from ERISA defendants. In this case the trust defendant chose to oppose Smith's interpretation of the pension plan and section 203(a), the nonforfeiture provision of ERISA. 29 U.S.C. Sec. 1053(a). See Smith v. CMTA Pension Trust, 654 F.2d at 656-66. An award of reasonable attorney's fees would deter trustees from opposing employee participant claims if the amount of the claim and the reasonableness of the employee's claim are such that the plaintiff's chances of success are great. If the employee's claim is frivolous, however, the trust will not be deterred from denying the claim as it would not run the same risk of liability for a judgment or for fees. On the other hand, when the positions of both parties have some merit, as in this case, a decision clarifying the terms of a plan after litigation would "benefit all participants and beneficiaries" by settling a disputed provision or an ambiguity. This would be helpful to the trustees in future administration, but "often depend[s] on a plaintiff's initiative in bringing suit." Carpenters Southern California Administrative Corp. v. Russell, 726 F.2d at 1416.

The fifth Hummell factor, the relative merits of the parties' positions, is, in the final analysis, the result obtained by the plaintiff. When the plaintiff receives what he or she sued for by way of voluntary settlement,

"the fee award should not be reduced simply because the plaintiff failed to prevail on every contention raised in the lawsuit. [Citation omitted]. Litigants in good faith may raise alternative legal grounds for a desired outcome, and the court's rejection of or failure to reach certain grounds is not a sufficient reason for reducing a fee. The result is what matters."

Hensley, 461 U.S. at ----, 103 S.Ct. at 1940, 76 L.Ed.2d at 52. By way of settlement, Smith received a portion of what he brought suit to recover, and so crossed the "statutory threshold" entitling him to recover fees from the defendant. See id. 461 U.S. at ----, 103 S.Ct....