Ursic v. Bethlehem Mines

Decision Date12 August 1983
Docket Number83-5242,Nos. 83-5155,s. 83-5155
Citation719 F.2d 670
Parties4 Employee Benefits Ca 2297, 14 Fed. R. Evid. Serv. 395 William B. URSIC, Appellee, v. BETHLEHEM MINES, a subsidiary of Bethlehem Steel Corporation; the Pension Plan of Bethlehem Steel Corporation and Subsidiary Companies; and D.W. Kempken, Plan Administrator, Appellants. . Submitted Pursuant to Third Circuit Rule 12(6) on
CourtU.S. Court of Appeals — Third Circuit

Carl H. Hellerstedt, Jr., Joseph Mack, III, Richard R. Riese, Brian J. Dougherty, Thorp, Reed & Armstrong, Pittsburgh, Pa., for appellants.

Stanford A. Segal, Gatz, Cohen, Segal & Koerner, Pittsburgh, Pa., for appellee.

Before ALDISERT and WEIS, Circuit Judges, and RE, Chief Judge. *

OPINION OF THE COURT

WEIS, Circuit Judge.

In this appeal we determine that the district court, 556 F.Supp. 571, properly chose to award an attorney's fee to the prevailing plaintiff in an ERISA case. However, we conclude that, although counsel was effective and competent, the nature of the factual and legal issues litigated did not justify an amount beyond the fee "lodestar" described in our precedents reviewed in this opinion.

William Ursic brought suit under section 510 of the Employee Retirement Income Security Act of 1974, 29 U.S.C. Sec. 1140 (1976), to recover past and future pension benefits. He alleged that Bethlehem Mines illegally discharged him to deprive him of pension rights. After a three-day bench trial, the district court accepted the plaintiff's position and concluded that the employer had violated ERISA. Following a brief post-trial hearing, the court awarded counsel fees in the amount of $20,200.00 and expenses of $1,130.87. Defendants, including the pension plan and its administrator, appeal contending that the district court erred both in its determination on the merits and in its award of an attorney's fee.

Bethlehem terminated plaintiff, a coal mine foreman, after twenty-nine and one-half years of employment and at a time when he needed only six months to qualify for a substantial pension. The reason Bethlehem gave for the discharge was that plaintiff violated company policy by borrowing, without permission, mining tools worth about $400.00. He contended, however, that the real reason for the discharge was to prevent him from receiving his pension. Ursic's work record had been good, he had been highly regarded by his superiors, and Bethlehem had tolerated tool borrowing by company employees until shortly before this incident.

The district court's legal conclusion that Bethlehem violated ERISA followed from the factual finding that the employer's asserted reason for the discharge was pretextual, and the real reason was to prevent Ursic from drawing his pension. The finding was based on evidence that plaintiff was an excellent employee, defendants were interested in reducing their pension obligations, discharge was harsh punishment for unauthorized borrowing, and imposition of this sanction on Ursic was discriminatory.

We conclude that the findings of fact were supported by the evidence and not clearly erroneous. See Krasnov v. Dinan, 465 F.2d 1298 (3d Cir.1972). We are also persuaded that the trial court did not err in its legal conclusions. Accordingly, we affirm the judgment on the ERISA claim.

We come to a different conclusion, however, with respect to the attorney's fee award. Defendants present us with two contentions: that the district court erred in allowing counsel fees to plaintiff, and, alternatively, that if an award is permissible, it was excessive in the circumstances here. The alternative argument does not challenge the allowance of $1,130.87 in expenses and we will not disturb that amount.

I

Section 502(g)(1) of ERISA provides that "the court in its discretion may allow a reasonable attorney's fee and costs of action to either party," 29 U.S.C. Sec. 1132(g)(1) (Supp. V 1981), but does not automatically mandate an award to a prevailing party. See Iron Workers Local No. 272 v. Bowen, 624 F.2d 1255, 1265 (5th Cir.1980). In determining whether to make any award of fees under ERISA, courts have considered five policy factors:

(1) the offending parties' culpability or bad faith;

(2) the ability of the offending parties to satisfy an award of attorneys' fees;

(3) the deterent effect of an award of attorneys' fees against the offending parties;

(4) the benefit conferred on members of the pension plan as a whole; and

(5) the relative merits of the parties' position.

See Hummell v. S.E. Rykoff & Co., 634 F.2d 446, 453 (9th Cir.1980); Iron Workers Local 272 v. Bowen, 624 F.2d at 1266; Eaves v. Penn, 587 F.2d 453, 465 (10th Cir.1978). In light of the foregoing factors, we conclude that the district court did not err in allowing an attorney's fee. We now turn to the amount awarded.

II

The district court granted plaintiff counsel's request for a lodestar of $10,200.00 (102 hours of work at $100.00 per hour) and for a $10,000.00 bonus based on the quality of work performed ($5,000) as well as the contingent nature of the case ($5,000.00). Defendants did not contest the reasonableness of the lodestar and challenged only the bonus.

Although a trial court has broad discretion in fixing a fee, we require some explanation of the decision. A "judge should set forth as specifically as possible the facts that support his [fee award]." Lindy Brothers Builders, Inc. v. American Radiator & Standard Sanitary Corp., 487 F.2d 161, 169 (3d Cir.1973) (Lindy I ). See also Hensley v. Eckerhart, --- U.S. ----, ----, 103 S.Ct. 1933, 1941, 76 L.Ed.2d 40 (1983).

In this case, we do not find an adequate explanation for the addition to the lodestar. In arriving at its decision to award a nearly 100 per cent bonus, the district court apparently accepted without question the amount stated in the plaintiff's fee petition. Neither the court nor the petition set forth any facts or rationale to support the bonus. The court did comment that at first it viewed the case as "almost frivolous," and only on further consideration did it become convinced that there was merit in the plaintiff's contention. But beyond this, no specific findings on either the contingent nature of the case or the quality of the work performed were made.

Allowing a bonus because of contingency is a means of rewarding counsel for accepting and prevailing in a case that, at the outset, had a low probability of success on the merits. See Lindy I, 487 F.2d at 168. But as we cautioned in Prandini v. National Tea Co., 557 F.2d 1015, 1020 (3d Cir.1977) (Prandini I ), the emphasis given to this factor depends in some degree on whether the fee is being paid from a common fund or by virtue of a statute. Where, as in this case, the award is statutory, the assessment of a counsel fee is to some extent a penalty for violating the law. From the defendant's standpoint, then, it is inconsistent to increase the fee when the defendant's liability was doubtful, but reduce it when the violation was flagrant and easily proved. The contingency factor loses its legitimacy when the penalty imposed on the party at fault is in inverse proportion to his culpability. See Prandini I, 557 F.2d at 1020; Hughes v. Repko, 578 F.2d 483, 491 (3d Cir.1978) (Garth, J., concurring); cf. Merola v. Atlantic Richfield Co., 515 F.2d 165 (3d Cir.1975).

Even if viewed from the plaintiff's perspective, the contingency risks reflected by large outlays of time and money were not present here. Nor was this a situation where recovery appeared to be highly questionable. Basic equities seemed to favor plaintiff who was discharged only six months before his pension eligibility vested. The scenario indicated a substantial, rather than a marginal, hope for success.

An increase based on the quality of work performed rewards counsel for exceptional work in a complex case culminating in an outstanding result. See Lindy Brothers, Inc. v. American Radiator & Standard Sanitary Corp., 540 F.2d 102, 114-15 (3d Cir.1976) (in banc ) (Lindy II ). Here the facts were not complicated, and the legal problems not difficult. The case was heard non-jury and required only three trial days of unexceptional length. Investigation of the facts, apparently performed solely by counsel at his usual hourly rate for legal services, 1 did not consume an inordinate amount of time. We do not find circumstances here that justify an additional award for the quality of work performed.

In disallowing the bonus, we do not demean counsel's ability. Indeed, the quality of counsel's services is reflected in the $100.00 hourly rate. We take judicial notice that in the Western District of Pennsylvania this amount reflects a fee charged by able and experienced counsel. It is self-evident that a high hourly rate presumes high quality work. To augment the lodestar on the basis of a "quality" factor, counsel must demonstrate either service or a result of an exceptional nature. As we stated in Silberman v. Bogle, 683 F.2d 62, 64 (3d Cir.1982):

"Such an increase or decrease is intended to take into account only an unusual degree of skill, superior or inferior, exhibited by counsel in the specific case before the court. The general quality of the attorney's practice and reputation is not to be considered in setting this factor, but enters instead into the determination of the reasonable hourly rate."

The record simply does not contain the substance needed to support the award of any bonus. Accordingly, we hold that the fee award in this case must be limited to the amount of the uncontested lodestar.

III

Because this court has seen a continuing and disturbing increase in appeals from attorney's fee awards generally, 2 we fear the guiding precepts may be misapprehended. We reaffirm the principle that the discretion to set attorney's fees is allocated to the district courts and not to the courts of appeals. Even when a district court judgment is vacated by this court and remanded for...

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