Filed: Sep. 12, 2013
Latest Update: Mar. 28, 2017
Summary: 12-1209-cv Carlson v. HSBC-N. Am. (US) Ret. Income Plan et al. UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT SUMMARY ORDER Rulings by summary order do not have precedential effect. Citation to a summary order filed on or after January 1, 2007, is permitted and is governed by Federal Rule of Appellate Procedure 32.1 and this court’s Local Rule 32.1.1. When citing a summary order in a document filed with this court, a party must cite either the Federal Appendix or an electronic database (w
Summary: 12-1209-cv Carlson v. HSBC-N. Am. (US) Ret. Income Plan et al. UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT SUMMARY ORDER Rulings by summary order do not have precedential effect. Citation to a summary order filed on or after January 1, 2007, is permitted and is governed by Federal Rule of Appellate Procedure 32.1 and this court’s Local Rule 32.1.1. When citing a summary order in a document filed with this court, a party must cite either the Federal Appendix or an electronic database (wi..
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12‐1209‐cv
Carlson v. HSBC‐N. Am. (US) Ret. Income Plan et al.
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
Rulings by summary order do not have precedential effect. Citation to a summary order filed on or after January
1, 2007, is permitted and is governed by Federal Rule of Appellate Procedure 32.1 and this court’s Local Rule 32.1.1.
When citing a summary order in a document filed with this court, a party must cite either the Federal Appendix
or an electronic database (with the notation “summary order”). A party citing a summary order must serve a copy
of it on any party not represented by counsel.
1 At a stated term of the United States Court of Appeals for the Second Circuit,
2 held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of
3 New York, on the 12th day of September, two thousand thirteen.
4
5 PRESENT:
6
7 ROBERT A. KATZMANN,
8 Chief Judge,
9 DENNIS JACOBS,
10 DEBRA ANN LIVINGSTON,
11
12 Circuit Judges.
13 _______________________________________________
14
15 MARY W. CARLSON, on her own behalf and on behalf of all others similarly
16 situated,
17
18 Plaintiff‐Appellant,
19 ‐v‐ No. 12‐1209‐cv
20
21 HSBC‐NORTH AMERICA (US) RETIREMENT INCOME PLAN, and the HSBC‐NORTH
22 AMERICA HOLDINGS ADMINISTRATIVE COMMITTEE, as Plan Administrator,
1
1 Defendants‐Appellees.
2 _______________________________________________
3 EDGAR PAUK (Robert Bach, on the brief), Brooklyn,
4 New York, for Plaintiff‐Appellant.
5 GARY F. KOTASKA, Phillips Lytle LLP, Buffalo, New
6 York, for Defendants‐Appellees.
7 UPON DUE CONSIDERATION, it is hereby ORDERED, ADJUDGED, and
8 DECREED that the judgment of the District Court is AFFIRMED in part and
9 VACATED in part and that the case is REMANDED for further proceedings.
10 Plaintiff‐Appellant Mary W. Carlson (“Carlson”) appeals from a judgment of
11 the United States District Court for the Eastern District of New York (Feuerstein, J.),
12 entered June 23, 2011, dismissing her putative class action complaint for lack of
13 subject matter jurisdiction and for failure to state a claim upon which relief can be
14 granted and denying her request for attorney’s fees. Carlson also appeals from an
15 order of the same court denying her motion for reconsideration. Carlson, a retired
16 employee of Manhattan Savings Bank (“MSB”) and a participant in the Manhattan
17 Savings Bank Pension Plan, contends that Defendants‐Appellees HSBC‐North
18 America (US) Retirement Income Plan (the “Plan”) as the successor of the MSB
19 Pension Plan, and the HSBC‐North America Holdings Administrative Committee
2
1 (the “Committee,” collectively “defendants”) as Plan Administrator, violated the
2 Employee Retirement Income Security Act of 1974 (“ERISA”) by not paying her an
3 implied reasonable rate of interest on delayed pension payments. Specifically, she
4 argues that an implied reasonable interest rate is a benefit due under the terms of
5 her pension plan, see ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B), and that
6 Amendment Eight to the Plan, which provided back payments with interest based
7 on the Short‐Term U.S. Treasury Bill Rate, violates ERISA’s anti‐cut back and anti‐
8 forfeiture provisions, see 29 U.S.C. §§ 1053(a), 1054(g), because the interest rate it
9 provides is lower than the reasonable interest rate Carlson alleges she was entitled
10 to under the implied terms of her Plan pre‐amendment.
11 We conclude that Carlson’s claims for a higher interest rate on delayed
12 payments are not moot, but that, assuming arguendo Carlson’s requested relief is
13 cognizable under ERISA § 502(a)(1)(B), the rate provided by defendants was
14 reasonable and did not violate ERISA’s anti‐cutback and anti‐forfeiture provisions.
15 We therefore AFFIRM the district court’s dismissal of her complaint for failure to
16 state a claim. Because Carlson has achieved some success on the merits, however,
17 we conclude she is statutorily eligible for an award of attorney’s fees under 29 U.S.C.
18 § 1132(g)(1). Accordingly, we VACATE the district court’s denial of attorney’s fees
3
1 and REMAND the case for the district court to consider in the first instance whether
2 an award of attorney’s fees is merited. We assume the parties’ familiarity with the
3 underlying facts, the procedural history of the case, and the issues on appeal, which
4 we reference only as necessary to explain our decision.
5 * * *
6 1. Mootness
7 Carlson’s first three claims allege that the defendants violated ERISA, as
8 interpreted by this Court in McDonald v. Pension Plan of the NYSA‐ILA Pension Trust
9 Fund, 320 F.3d 151 (2d Cir. 2003), by not fully crediting Carlson’s pre‐ERISA, pre‐
10 break in service employment in accordance with the rule of parity when calculating
11 her monthly pension. However, after Carlson filed her complaint, defendants
12 adopted Amendment Eight, which applied the rule of parity in accordance with
13 McDonald to Plan participants who incurred a forfeiture because of a pre‐ERISA
14 break in service. Because Amendment Eight provided for application of the rule of
15 parity, applied a 100% benefit rate to pre‐ERISA service, and provided interest on
16 delayed payments, the district court reasoned that it could render no judgment with
17 respect to the first three claims “that would have a practical effect on the legal rights
18 of the parties” and therefore dismissed the claims as moot. Carlson v. HSBC‐N. Am.
4
1 Holdings Admin. Comm., No. CV‐09‐3131, 2011 WL 2516592, at *3 (E.D.N.Y. June 21,
2 2011). Carlson contends that her claims are not moot because she requested a higher
3 interest rate, 9%, than that provided for by Amendment Eight. We agree.
4 In reviewing a district court’s dismissal for lack of subject matter jurisdiction,
5 we review legal conclusions de novo and factual findings for clear error. Maloney v.
6 Soc. Sec. Admin., 517 F.3d 70, 74 (2d Cir. 2008). A claim becomes moot “when the
7 parties have no legally cognizable interest or practical personal stake in the dispute
8 and the court is therefore incapable of granting a judgment that will affect the legal
9 rights as between the parties.” ABN Amro Verzekeringen BV v. Geologistics Americas,
10 Inc., 485 F.3d 85, 94 (2d Cir. 2007) (internal quotation marks and citation omitted).
11 Because a court could enter a judgment – that Carlson is entitled to a higher interest
12 rate – that would affect the parties’ legal rights, the claims are not moot. See id.
13 2. Entitlement to a higher rate of interest
14 Carlson argues that: (1) because her pension plan provided that her payments
15 would be made on a date certain, she is entitled to a reasonable rate of interest on
16 her delayed payments as a benefit due to her under the terms of her plan and (2)
17 Amendment Eight impermissibly reduced this accrued benefit by adopting an
18 unreasonably low interest rate. Assuming arguendo that an implied reasonable
5
1 interest rate can constitute a benefit due under the plan’s terms, ERISA does not
2 state a particular rate of interest for delayed payments, and no specific implied or
3 ideal rate can be divined from the statute. See Novella v. Westchester Cnty., 661 F.3d
4 128, 150 & n.25 (2d Cir. 2011). Where the contract establishes no rate of interest, our
5 Court has recognized that a district court may, in its discretion, impose a reasonable
6 rate in deciding cases of late payment. See Milgram v. Orthopedic Assocs. Defined
7 Contribution Pension Plan, 666 F.3d 68, 79 (2d Cir. 2011); Novella, 661 F.3d at 150;
8 Slupinski v. First Unum Life Ins. Co., 554 F.3d 38, 53‐54 (2d Cir. 2009). Where,
9 however, the plan administrator has the discretion to set a specific interest rate for
10 delayed payments and does so, that rate is enforceable and reviewable for abuse of
11 discretion. Cf. Dobson v. Hartford Fin. Servs. Grp., 389 F.3d 386, 396 (2d Cir. 2004)
12 (“[W]hether interest is due under the terms of a plan is determined by inspecting the
13 terms of the particular plan.”); Iron Workers Dist. Council v. Hudson Steel Fabricators
14 & Erectors, Inc., 68 F.3d 1502, 1508 (2d Cir. 1995) (vacating a district court’s
15 downward modification of a plan’s interest rate set at two percent per month for
16 delinquent contributions); see also Operating Eng’rs Local 139 Health Benefit Fund v.
17 Gustafson Constr. Corp., 258 F.3d 645, 653 (7th Cir. 2001).
6
1 Here, Amendment Eight of the Plan provided for payment of interest in
2 accordance with the Short‐Term U.S. Treasury Bill Rate. There is no indication in
3 the complaint that the Short‐Term U.S. Treasury Bill Rate, which translates to 3.39%
4 interest compounded annually on Carlson’s back payments, was unreasonable “in
5 light of the interest rates in effect between 1992 and 2010.” Compl. ¶ 16. Though
6 Carlson contends that she is plausibly entitled to 9% interest because New York law
7 provides that “[i]nterest shall be at the rate of nine per centum per annum, except
8 where otherwise provided by statute,” N.Y. C.P.L.R. § 5004, the 9% rate is not
9 binding on federal courts considering federal claims, cf. Thomas v. iStar Fin., Inc., 629
10 F.3d 276, 280 (2d Cir. 2010).
11 Carlson’s fifth and sixth claims seek a higher interest rate on the theory that
12 Amendment Eight’s interest provision impermissibly reduces Carlson’s accrued
13 benefits in violation of ERISA § 204(g), an anti‐cutback provision, and ERISA
14 § 203(a), an anti‐forfeiture provision. ERISA § 204(g) provides that “[t]he accrued
15 benefit of a participant under a plan may not be decreased by an amendment of the
16 plan,” except for limited exceptions not applicable here. 29 U.S.C. § 1054(g)(1).
17 Similarly, ERISA § 203(a) provides that “[e]ach pension plan shall provide that an
18 employee’s right to his normal retirement benefit is nonforfeitable upon the
7
1 attainment of normal retirement age.” 29 U.S.C. §1053(a). A defined benefit plan
2 satisfies ERISA § 203(a) if an employee has a nonforfeitable right both to his accrued
3 benefit derived from his own contributions and to a percentage, based on his years
4 of service, of his accrued benefit derived from employer contributions. Id.
5 Assuming arguendo that an implied reasonable interest rate qualifies as an accrued
6 benefit protected by these provisions, Amendment Eight provided for interest on
7 delayed payments at a 100% benefit rate, it was reasonable, and it did not reduce
8 accrued benefits in violation of ERISA’s anti‐cutback and anti‐forfeiture provisions.
9 We agree with the district court that these claims fail.
10 3. Attorney’s Fees
11 Carlson also appeals the district court’s sua sponte denial of attorney’s fees.
12 She asserts that she is entitled to attorney’s fees both under the common fund
13 doctrine, on the theory that the litigation produced a common fund for the benefit
14 of the class members on whose behalf she brought the claim, see Savoie v. Merchants
15 Bank, 84 F.3d 52, 56 (2d Cir. 1996), and pursuant to ERISA’s fee‐shifting provision,
16 29 U.S.C. § 1132(g)(1). While Carlson is not entitled to recover fees under the
17 common fund doctrine, she is eligible for an award of attorney’s fees under 29 U.S.C.
18 § 1132(g)(1).
8
1 a. Common Fund Doctrine
2 The standard for recovering fees under the common fund doctrine is well‐
3 established: “A party recovering a fund for the benefit of others, in addition to
4 himself, may recover his costs, including his attorney’s fees, from the fund itself or
5 directly from the other parties enjoying the benefit.” Savoie, 84 F.3d at 56. To recover
6 fees, a party need not have won the lawsuit; but if the dispute has become moot, the
7 district court “must determine whether [the] plaintiff’s suit was a substantial cause
8 of the benefit obtained.” Id. at 56‐57. However, parties cannot recover attorney’s fees
9 pursuant to the common fund doctrine from vested, but undistributed, ERISA
10 benefits. Kickham Hanley P.C. v. Kodak Ret. Income Plan, 558 F.3d 204, 209‐10 (2d Cir.
11 2009). Under ERISA, “[e]ach pension plan shall provide that benefits provided
12 under the plan may not be assigned or alienated.” 29 U.S.C. § 1056(d)(1). The anti‐
13 alienation provision “reflects a considered congressional policy choice, a decision
14 to safeguard a stream of income for pensioners . . . even if that decision prevents
15 others from securing relief for the wrongs done them.” Kickham Hanley, 558 F.3d at
16 211 (alteration in original) (quoting Guidry v. Sheet Metal Workers Nat’l Pension Fund,
17 493 U.S. 365, 376 (1990)). While the statute does not bar collecting attorney’s fees
18 from funds created by the settlement of contested pension claims that plan
9
1 participants may secure only by releasing potential claims, it does bar garnishing
2 plan participants’ pension entitlements. Id. at 213‐14.
3 Here, Carlson seeks to recover attorney’s fees from the money the Plan has
4 pledged to pay to the members of the proposed class. But the plan participants are
5 entitled to these payments under the terms of the Plan and are not required to
6 release any potential claims to receive the funds. “That [Carlson] allegedly helped
7 bring about [defendants’] recognition that plan participants were entitled to their
8 pension benefits does not alter the conclusion that these are pension entitlements”
9 protected by ERISA’s anti‐alienation provision. See id. at 214. Because the funds are
10 pension entitlements, no common fund was created, and the claim for fees fails as
11 a matter of law, at least under the common fund theory.
12 b. 29 U.S.C. § 1132(g)(1)
13 Carlson also claims she is entitled to attorney’s fees under ERISA’s fee‐shifting
14 provision, 29 U.S.C. § 1132(g)(1). Because the district court erred in concluding that
15 Carlson had not achieved some degree of success on the merits, we vacate and
16 remand that portion of the district court’s decision.
17 ERISA’s fee‐shifting provision provides that “[i]n any action under this
18 subchapter . . . by a participant, beneficiary, or fiduciary, the court in its discretion
10
1 may allow a reasonable attorney’s fee and costs of action to either party.” 29 U.S.C.
2 § 1132(g)(1). By its terms, the statute grants district courts discretion to award fees
3 to either party and does not limit awards only to prevailing parties. See Hardt v.
4 Reliance Standard Life Ins. Co, 130 S. Ct. 2149, 2156 (2010). Rather, “a fees claimant
5 must show ‘some degree of success on the merits’ before a court may award attorney
6 fees under § 1132(g)(1).” Id. If a district court finds that a claimant has demonstrated
7 some degree of success on the merits, it is not required to award fees simply because
8 this pre‐condition is met. Toussaint v. JJ Weiser, Inc., 648 F.3d 108, 110 (2d Cir. 2011)
9 (per curiam). Moreover, in deciding whether to award fees, a district court may, but
10 is not required to, channel its discretion through the set of factors laid out in
11 Chambless v. Masters, Mates & Pilots Pension Plan, 815 F.2d 869 (2d Cir. 1987). See
12 Toussaint, 648 F.3d at 110; see also Hardt, 130 S. Ct. at 2158 & n.8.
13 Here, the district court stated in a footnote that “[s]ince plaintiff’s amended
14 complaint is dismissed in its entirety, plaintiff is not entitled to any costs and
15 attorney’s fees.” Carlson, 2011 WL 2516592, at *3 n.5. In her motion for
16 reconsideration, Carlson argued that, notwithstanding the dismissal of her
17 complaint, she could still recover attorney’s fees because, pursuant to the Supreme
18 Court’s analysis in Hardt, 29 U.S.C. § 1132(g)(1) does not limit awards to prevailing
11
1 parties. The district court responded without additional explanation: “[T]here being
2 no judicial determination that plaintiff’s claims had ‘some degree of success on the
3 merits,’ this Court did not overlook Hardt . . . in exercising its discretion under 29
4 U.S.C. § 1132(g)(1) to deny plaintiff’s claim for costs and attorney’s fees.” Order
5 Denying Motion for Reconsideration, Carlson v. HSBC‐N. Am. Holdings Admin.
6 Comm., No. CV‐09‐3131, 2012 WL 959417, at *2 (E.D.N.Y. Mar. 20, 2012).
7 Carlson’s lawsuit prompted defendants to modify how the Plan credited pre‐
8 ERISA breaks in service – a change which provided Carlson most of the benefits she
9 sought. Prior to the lawsuit, the Committee refused to credit Carlson’s first 5.3 years
10 of service fully and refused to be bound by McDonald. Only after Carlson filed her
11 present suit, and only after the defendants answered the complaint, did the
12 defendants finally concede that McDonald applies. And only after Carlson rejected
13 an offer to settle her individual claims did Amendment Eight pass, crediting
14 Carlson’s pre‐ERISA, pre‐break in service employment at a 100% accrual rate. See
15 Carlson, 2011 WL 2516592, at *3 (noting that “Amendment Eight provides complete
16 relief to both plaintiff and the putative class by entitling them to the benefits,
17 including interest, they would have accrued had the pre‐amendment Plan operated
18 in compliance with the ‘rule of parity,’ the Plan and ERISA”). Though Carlson did
12
1 not obtain her desired interest rate, her success in pushing defendants to comply
2 with the rule of parity was hardly “trivial” or a “purely procedural victory.” Hardt,
3 130 S. Ct. at 2158 (internal brackets omitted). Thus, Carlson achieved, at a minimum,
4 some success on the merits and is eligible for an award of attorney’s fees under 29
5 U.S.C § 1132(g)(1).
6 That this success came as a result of Amendment Eight and not as a result of
7 a judicial order does not affect the analysis. Though the district court in Hardt
8 ordered defendants to review petitioner’s claim, nothing in Hardt indicates that a
9 formal court order is required, provided that the fee claimant otherwise achieves the
10 requisite level of success. Likewise nothing in Hardt indicates that the result there
11 would have been any different if the defendant had voluntarily reviewed and paid
12 the claim in order to moot the lawsuit without an order from the court.
13 Though we conclude that Carlson is thus eligible for attorney’s fees under 29
14 U.S.C. § 1132(g)(1), we take no position on whether an award is merited here. That
15 decision is committed to the discretion of the district court, and it is for the district
16 court to consider the question in the first instance and “articulate reasons for its
17 decision to grant or deny fees.” Connors v. Conn. Gen. Life Ins. Co., 272 F.3d 127, 137
18 (2d Cir. 2001).
13
1 All arguments not otherwise discussed in this summary order are found to be
2 moot or without merit. For the foregoing reasons, the judgment of the district court
3 is AFFIRMED in part and VACATED in part and the case is REMANDED for
4 further proceedings..
5 FOR THE COURT:
6 Catherine O’Hagan Wolfe, Clerk
14
