Counsel Denied Additional Attorneys' Fees from Class in ERISA Fee-shifting Case: Seventh Circuit | Practical Law

Counsel Denied Additional Attorneys' Fees from Class in ERISA Fee-shifting Case: Seventh Circuit | Practical Law

In Pierce v. Visteon Corp., the US Court of Appeals for the Seventh Circuit held that class counsel in a case litigated under ERISA's fee-shifting provision was not entitled to attorneys' fees from the class in addition to the fees paid by defendants, the losing parties.

Counsel Denied Additional Attorneys' Fees from Class in ERISA Fee-shifting Case: Seventh Circuit

by Practical Law Litigation
Law stated as of 07 Jul 2015 • USA (National/Federal)
In Pierce v. Visteon Corp., the US Court of Appeals for the Seventh Circuit held that class counsel in a case litigated under ERISA's fee-shifting provision was not entitled to attorneys' fees from the class in addition to the fees paid by defendants, the losing parties.
On July 1, 2015, in Pierce v. Visteon Corp., the US Court of Appeals for the Seventh Circuit held that class counsel in a case litigated under ERISA's fee-shifting provision was not entitled to attorneys' fees from the class in addition to the fees paid by defendants, the losing parties (No. 14-2542, (7th Cir. July 1, 2015)).
Terminated employees brought a putative class action against defendants Visteon Corporation and Visteon Systems, LLC (collectively, Visteon), alleging that Visteon failed to deliver timely notice of the employees' opportunity to continue health insurance at their own expense under the Consolidated Omnibus Budget Reconciliation Act (COBRA) (see Standard Document, COBRA Election Notice and Practice Note, COBRA Overview). Following class certification and a bench trial, the US District Court for the Southern District of Indiana entered judgment in favor of the employees and awarded almost $303,000 in attorneys' fees to Ronald E. Weldy, counsel for the class, under the fee-shifting statute of the Employee Retirement Income Security Act (ERISA). Because COBRA amended ERISA (among other laws), ERISA's attorneys’ fees provisions apply in litigated COBRA disputes (see Practice Note, ERISA Litigation: Attorney's Fees).
Although Weldy did not contend that the fee amount was too low, he nevertheless appealed the attorneys' fee award and sought additional fees from the class. Weldy argued that the district court should have treated the class award as a "common fund" case in which, having generated a pot of money for the class, he could dip into the pot to supplement his statutory compensation.
The Seventh Circuit held for the first time that because the case was litigated under a fee-shifting statute, and in the absence of a contract, Weldy was not entitled to money from the class on top or in lieu of payment by Visteon. The court reasoned that:
  • The common fund doctrine is part of the common law, and the fee-shifting provision in ERISA is a statutory replacement for the common law.
  • Fee-shifting statutes were designed to ensure that the victims of a civil case receive full compensation and the wrongdoer pays the lawyers. That interest would be disserved by transferring some of the class's money to its lawyers in lieu or on top of the award under the fee-shifting statute.
  • ERISA's fee-shifting provision provided for the award of a reasonable fee, which the district court fixed at almost $303,000. Weldy did not assert that the fee was unreasonable. If Weldy pocketed more than the $303,000, his compensation would by definition be unreasonably high.
The Seventh Circuit affirmed the district court's decision, denying Weldy the ability to supplement his fee from his own clients' funds.
In other benefits litigation contexts, however, the courts have been more willing to apply the common fund doctrine. In US Airways, Inc. v. McCuthen, for example, the US Supreme Court concluded that the common fund doctrine could be used to interpret a health plan's subrogation/reimbursement provision where the plan's summary plan description was silent regarding how to allocate the costs of obtaining a recovery (see SPD Language, Subrogation and Reimbursement: Common Fund Doctrine) (No. 11-1285, (2013)).