Seldom Seen: Awarding Attorney's Fees Under ERISA to a Prevailing Defendant

This is something you don’t see every day, namely an award of significant attorney’s fees to the prevailing defendant in an ERISA governed action. In R.I. Carpenters Annuity Fund v. Trevi Icos Corp., just decided by the United States District Court for the District of Rhode Island (but not yet up on its website), the court entered such an award against the losing plaintiff, a union provided employee benefit plan, on a claim brought by it under ERISA, even though the court acknowledged that ERISA’s fee shifting provisions are seldom used to require a losing plaintiff to pay attorney’s fees to a prevailing defendant. Here, however, the plaintiff had used ERISA as an alternative mechanism for litigating a jurisdictional dispute with another union over a project, apparently for tactical reasons related to adverse rulings against it before the National Labor Relations Board in other, similar circumstances. The court provides a nice review of the factors in the First Circuit that govern the decision whether to award attorney’s fees to a prevailing party, and noted that the key issue in the case before it was whether the plaintiff’s decision to use ERISA as a tactical tool for litigation strategy constituted a misuse of the statute, warranting an award of attorney’s fees in favor of the prevailing defendant. The court explained:

The Court should consider five factors in deciding whether to award fees and costs to a party: (1) the degree of culpability or bad faith attributable to the losing party; (2) the depth of the losing party's pocket, i.e., his or her capacity to pay an award; (3) the extent (if at all) to which such an award would deter other persons acting under similar circumstances; (4) the benefit (if any) that the successful suit confers on plan participants or beneficiaries generally; and (5) the relative merit of the parties' positions. Cottrill v. Sparrow, Johnson & Ursillo, Inc., 100 F.3d 220, 225 (1st Cir. 1996); see also Beauvais v. Citizens Fin. Group, Inc., 418 F. Supp. 2d 22, 33 (D.R.I. 2006). These so-called Cottrill factors are guidelines and do not preclude the Court from consideration of other factors. Cook, 334 F.3d at 124. Rather, the Court may - and should - consider "additional criteria that seem apropos." Cottrill, 100 F.3d at 225. Ultimately, the test for granting or denying attorney's fees and costs in an ERISA case is, in a word, "flexible." Id.; see also Gray v. New England Tel. & Tel. Co., 792 F.2d 251, 258 (1st Cir. 1986).ERISA's broad language permits the Court to award fees and costs to "either" party. However, the substantive purpose of ERISA is remedial, i.e., it is designed to protect "the interests of participants in employee benefit plans and their beneficiaries." 29 U.S.C. § 1001(b). Consequently, some courts have noted that fees or costs seldom should be assessed against unsuccessful ERISA plaintiffs. See, e.g., Operating Eng'rs Pension Trust v. Gilliam, 737 F.2d 1501, 1505-06 (9th Cir. 1984); Marquardt v. N. Am. Car Corp., 652 F.2d 715, 719-20 (7th Cir. 1981). Before the Court tackles the individual Cottrill factors it should be noted that this is not a typical ERISA case. As was discussed in the Court's decision denying summary judgment, the driving force behind this action seems to be a jurisdictional dispute between two labor unions -- the Carpenters Union Local 94 and the Laborers Union, both of which claimed the right to represent the workers on the "front-end" of the CM-120. R. I. Carpenters Annuity Fund v. Trevi Icos Corp., 474 F. Supp. 2d 326, 331 (D.R.I. 2007). Whether fees should be awarded turns on the question of whether it is appropriate to use ERISA litigation as a vehicle to pursue Local 94's claim of jurisdiction. If it is legitimate to use ERISA in this way, then even an unsuccessful Plaintiff might not be "culpable" under the Cottrill factors. If it is not, then to use ERISA this way (at the expense of an innocent employer) more likely evidences culpability under the Cottrill analysis.

The court then concluded that the plaintiff’s strategic use of ERISA in this manner was not appropriate, and justified an award of attorney’s fees to the defendant.

It is a fascinating decision for at least two reasons. The first is the relative rarity of a court granting attorney’s fees to the prevailing defendant, and the case presents a road map as to one particular line of argument that a defendant can pursue to seek such an award. The second is that the case drives home the need to consider the rationale for including an ERISA claim in a case, and suggests that there are risks to using ERISA in situations where other statutes or theories of liability are better suited to targeting the specific mischief at issue.