District Court May Not Refuse To Award Prevailing ERISA Plaintiff Attorney’s Fee Without Performing Full Analysis Of Relevant Factors

On March 11, 2014, the Second Circuit issued a decision in Donachie v. Liberty Mutual Ins. Co. et al., Nos. 12-2996-CV (Lead), 12-3031 (XAP), clarifying “the scope of a district court’s discretion in deciding whether to award attorneys’ fees to a prevailing” ERISA plaintiff.

In Donachie, the EDNY granted the plaintiff summary judgment “on his claim for long-term disability benefits pursuant to ERISA,” but denied the “plaintiff’s request for attorneys’ fees, based on the conclusion that defendant did not act in bad faith.” The Second Circuit reversed the denial of an award of attorneys’ fees, explaining:

[A] district court’s discretion to award attorneys’ fees under ERISA is not unlimited, inasmuch as it may only award attorneys’ fees to a beneficiary who has obtained some degree of success on the merits. . . . [W]hether a plaintiff has obtained some degree of success on the merits is the sole factor that a court must consider in exercising its discretion. Although a court may, without further inquiry, award attorneys’ fees to a plaintiff who has had some degree of success on the merits, . . . courts retain discretion to consider five additional factors in deciding whether to award attorney’s fees. Those five factors, known in this Circuit as the Chambless factors are:

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

. . .

[However,] if a court chooses to consider factors other than a plaintiff’s success on the merits in assessing a request for attorneys’ fees, Chambless still provides the relevant framework in this Circuit, and courts must deploy that useful framework in a manner consistent with our case law. A court cannot selectively consider some factors while ignoring others.

(Internal quotations and citations omitted) (bold emphasis added).

Because the district court “misapplied” the Chambless “framework,” the Second Circuit found that it had abused its discretion and, on performing the analysis itself, found no reason to deny an award and remanded the case to the district court for an award of reasonable fees.

Deadline For Making Claim For Attorneys’ Fees In FRCP 54 Does Not Apply To Claims For Appellate Fees

In Long Island Head Start Child Development Services, Inc., v. Economic Opportunity Commission, 00 CV 7394 (E.D.N.Y. Dec. 5, 2013), Judge Arthur Spatt held that a claim for appellate attorneys’ fees under ERISA’s fee shifting provisions is not governed by the 14-day deadline set forth in Federal Rule of Civil Procedure 54(d)(2)(B).  Under that Rule, a motion for an award of attorneys’ fees must be brought “no later than 14 days after the entry of judgment.”  The defendant had appealed an adverse judgment to the Second Circuit and lost.  The Circuit issued its mandate on June 10, 2013.  Two and a half months later, on August 29, 2013, the plaintiffs moved under ERISA to recover their appellate attorneys’ fees.

The defendants argued that the motion was out of time under Rule 54(d)(2)(B), and should be denied, because it was made more than 14 days after “the entry of judgment.”  The court examined whether the word “judgment” used in the Rule includes an appellate judgment.  The court noted that Rule 54(a) defines judgment as a “decree and any order from which an appeal lies,” and that, as a Northern District of Texas court had ruled, an appellate judgment could qualify because “a judgment from the Court of Appeals can be appealed to the United States Supreme Court.”  Slip op. at 5.  The court ultimately rejected that view, however, based on an earlier Eastern District case that decided the same question under the fee-shifting provisions of Title VII, and held that since Title VII contained no deadline, and since neither the Federal Rules of Appellate Procedure nor the Second Circuit’s local rules contained a deadline, the fee motion had only to be made within a reasonable period.

Reasoning that ERISA also had no deadline for making a motion for appellate fees, the Court ruled that motions under ERISA’s fee-shifting provisions likewise had only to be made “within a reasonable of time after the circuit’s entry of final judgment.”  Slip op. at 8.  Other fee shifting statutes are unlikely to be far behind.  (As for the two and a half months it took plaintiffs to make their motion, the Court held the time was not unreasonable because it was only two days after the defendants’ right to petition for U.S. Supreme Court review had lapsed.)