ROBERT J. JONKER, District Judge.
This matter is before the Court on Plaintiff Charles Huizinga's motion for attorney's fees (docket #218) and Defendants Genzink Steel Supply and Welding Co. and Ken Genzink's (collectively "Defendants") motion for attorney's fees (docket # 220). Huizinga requests $171,748.45
On March 4, 2010, Huizinga filed a four-count complaint, alleging (1) breach of ERISA fiduciary duty, (2) wrongful discharge under ERISA, (3) violation of the Michigan Whistle-blowers' Protection Act, and (4) violation of Michigan public policy. Defendants filed a counterclaim against Huizinga for breach of fiduciary duty. (See docket # 16 (amended counterclaim).) On June 4, 2010, Huizinga filed an amended complaint, adding a fifth claim for ERISA retaliation for Defendants' filing of a counterclaim in this case. (Docket # 70.) On June 30, 2011, the Court granted summary judgment to Defendants on Counts Three through Five. (Docket # 121.) The Court also granted Huizinga's motion for summary judgment with respect to Defendants' counterclaim, finding that "no reasonable fact-finder could conclude that [Huizinga] breached any applicable fiduciary duty he owed as an employee and CFO... based on the specific incidents alleged."
The Court held a four-day bench trial in May 2013 on the remaining two issues: (1) the appropriate remedy for Defendants' breach of their fiduciary duty (Count One), and (2) whether Huizinga was fired in retaliation for saying that he was going to inform the government of the fees charged by the Plan's administrator, Ron Roti (Count Two). On August 27, 2013, the Court ordered equitable remedies in Count One, including restitution in the amount of $320,964, and entered judgment in favor of Defendants on Count Two. (See Opinion
ERISA § 502 provides, "[i]n any action under this subchapter ... by a participant, beneficiary, or fiduciary, the court in its discretion may allow a reasonable attorney's fee and costs of action to either party." 29 U.S.C. § 1132(g)(1). The Supreme Court's decision in Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242, 130 S.Ct. 2149, 176 L.Ed.2d 998 (2010), clarified that a fee claimant need not be a "prevailing party" to be eligible for attorney's fees under ERISA's fee-shifting statute. Id. at 254, 130 S.Ct. 2149. Rather, eligibility for attorney's fees merely requires that the claimant achieve "some degree of success on the merits." Id. "Under § 502(g)(2) of ERISA (29 U.S.C. § 1132(g)(2)), the award of reasonable attorney fees is mandatory where a fiduciary has sued successfully to enforce an employer's obligation to make contributions to a multi-employer plan. In any other action under ERISA, however, the statute provides that `the court in its discretion may allow a reasonable attorney's fee and costs of action to either party.' ERISA § 502(g)(1) (29 U.S.C. § 1132(g)(1))." Foltice v. Guardsman Prods., Inc., 98 F.3d 933, 936 (6th Cir.1996). There is "no presumption as to whether attorney fees will be awarded." Id. (citing Armistead v. Vernitron Corp., 944 F.2d 1287, 1301-02 (6th Cir.1991)). A five-factor test articulated in Secretary of Labor v. King, 775 F.2d 666 (6th Cir.1985), has become a practical benchmark for whether to award fees. These factors include:
King, 775 F.2d at 669. "[W]hile the five-factor King test is not required [after Hardt], it still has validity in helping courts determine whether or not to award fees to a party that achieves some degree of success on the merits." Ciaramitaro v. Unum Life Ins. Co. of Am., 521 Fed.Appx. 430, 437 (6th Cir.2013); see also Hardt, 560 U.S. at 255 n. 8, 130 S.Ct. 2149 (observing that after a court has determined that a claimant has achieved some success on the merits, a court "may" consider the five-factor test). "The King factors are not statutory, and so should be looked at holistically, with no one factor `necessarily dispositive.'" Warner v. DSM Pharma Chems. N. Am., Inc., 452 Fed.Appx. 677, 681 (6th Cir.2011) (quoting Foltice, 98 F.3d at 937).
The ERISA statute expressly grants courts discretion to award attorney's fees "to either party." 29 U.S.C. § 1132(g)(1). Nonetheless, in most ERISA cases, the nature of the King factors makes it less likely that the factors will favor an award to defendants.
In this case, both parties undoubtedly achieved a degree of success on ERISA claims. Huizinga won summary judgment on Count One, resulting in equitable relief, including a significant amount of restitution. At trial, Defendant Genzink Steel won on Count Two, the ERISA retaliation claim. Therefore, both parties achieved some degree of success on the merits within the meaning of Hardt. The Court will therefore consider whether the King factors favor an award to either party.
Defendants Ken Genzink and Genzink Steel seek $332,607 in attorney's fees. With respect to Defendants, the King factors weigh against granting an attorney's fees award.
Under the first King factor, the Court considers "the degree of the opposing party's culpability or bad faith." King, 775 F.2d at 669. Here, there is no evidence of culpability or bad faith. Rather, the Court finds that Huizinga pursued his ERISA claims with a deeply held and rational belief that he was terminated because he spoke out about the ERISA Plan. The timing of Huizinga's termination alone was suspicious. The Court ultimately found facts against Huizinga, but the Court did not and does not find that he had bad faith. This factor weighs against an award.
The Court next considers the opposing party's ability to satisfy an award. Huizinga argues that the Court should consider the relative economic positions of the parties because the fees requested by Defendants would be an onerous burden, and it was not the intention of the ERISA attorney's fees provision to expose plaintiffs to such risks. In this case, a company that, by its own testimony, is doing very well financially seeks recovery from an individual accountant who maintains part-time employment. The award sought reflects three times Huizinga's annual salary while employed at Genzink Steel and an even larger multiple of his current salary. This factor weighs against an award.
This factor is an inquiry into the deterrent effect of an attorney's fees award on other parties, such as plan administrators,
This is not a case in which an award to the defendants is necessary to "discourag[e] other litigants from relentlessly pursuing groundless claims." Credit Managers Ass'n of S. Cal. v. Kennesaw Life, 25 F.3d 743, 748 (9th Cir.1994). Rather, because the Court does not find culpability or bad faith by Huizinga, the more likely effect of an award in this case would be to discourage good faith ERISA claimants from bringing claims in good faith. Many courts have reflected on the chilling effect that awarding attorney's fees against an ERISA plaintiff may have on future good faith claimants. See, e.g., Toussaint v. JJ Weiser, Inc., 648 F.3d 108, 111 (2d Cir. 2011) (citing Salovaara v. Eckert, 222 F.3d 19, 28 (2d Cir.2000)). This is one concern that may be taken into account in considering the deterrent effect of an award. This factor weighs against an award.
The fourth factor is whether the party requesting fees sought to confer a common benefit or resolve significant legal ERISA questions. The retaliatory discharge claim did not raise a significant ERISA legal issue, and Defendants sought only to protect themselves in defending it. Defendants do not argue otherwise. This factor weighs against an award.
Finally, the Court considers the relative merits of the parties' positions. This is not a case in which one party prevailed "cleanly, unequivocally, and absolutely," First Trust Corp. v. Bryant, 410 F.3d 842, 854 (2005). The results are mixed: of Huizinga's four original claims, the Court granted summary judgment in favor of Huizinga on one, granted summary judgment in favor of Defendants on two, and ruled in favor of Defendants after a bench trial on the remaining claim. However, regarding Huizinga's breach of fiduciary duty claim (Count One), the evidence was so one-sided that the Court granted summary judgment in favor of Huizinga, and later imposed equitable relief, including significant restitution. That recovery should receive substantial weight in balancing the relative merits of the claims. Regarding Huizinga's wrongful discharge claim that proceeded to trial (Count Two), Huizinga acted on a rational belief that he was terminated because he spoke out about the ERISA Plan. Ultimately, the Court found that Huizinga failed to satisfy his burden of proof, but Huizinga's claim was supported by evidence that made trial essential to adjudication of the claim. In
Altogether, the factors weigh against an attorney's fees award to Defendants. The Court will therefore deny Defendants' motion for attorney's fees.
Huizinga seeks $171,748.45 in attorney's fees and $3,253.13 in costs. Applying the King factors, an award of attorney's fees to Huizinga is appropriate.
The Court first considers the degree of the opposing party's culpability or bad faith. In granting Huizinga's motion for summary judgment, the Court determined that Ken and Don Genzink had breached their fiduciary duty to the Plan. The Genzinks' fiduciary duty required them to know what the Plan was paying in service charges to whom and for what purpose. As applied to this case, it required the Genzinks to know what compensation Roti received, both directly and indirectly, from the Plan. The Court previously noted that not only did the Genzinks fail to execute their duty,
(Docket # 155, Page ID 3363-64.) Specifically, the Court found that Don Genzink was a Plan trustee in name only, with Ken Genzink as the trustee in practice. (Id. at 3364.) Don Genzink's decisions were based entirely on the information and recommendations of Roti and Ken Genzink. (Id.) Don Genzink undertook no independent inquiry of his own regarding issues related to the Plan. (Id.) As such, Don Genzink did not act in a manner consistent with his fiduciary duty. (Id.)
Ken Genzink testified that he relied almost exclusive on Roti's spreadsheet to select UNIFI as a plan provider. (Id.) However, the spreadsheet did not include all the information required for Ken Genzink to make a decision in the best interests of the Plan participants — most saliently, he lacked information on Roti's financial incentives for completing a transaction with each prospective provider. (Id. at 3364-65.) Ultimately, the Court found that the Genzinks lacked even a basic understanding of how Roti was compensated or the amount of compensation. (Id.) In fact, the Court observed that even with the benefit of additional discovery and briefing from the parties, the Court was still unable at the time of summary judgment to conclusively determine what compensation Roti received for his services. (Id. at 3366.) The Genzinks were culpable for breach of their fiduciary duty, so the first factor weighs in favor of Huizinga.
Defendants argue that this factor weighs in their favor because they were not "blameworthy." (Docket #232, Page ID 4410.) For support, Defendants cite Foltice v. Guardsman Prods., Inc., 98 F.3d 933 (6th Cir.1996). In Foltice, the court reviewed a district court's denial of attorney's fees to an employee in an ERISA
Defendants may be culpable without evincing bad faith. "Culpable" means "guilty" or "blameworthy" or "[i]nvolving the breach of a duty." Black's Law Dictionary 407 (8th ed. 2004). By contrast, the Sixth Circuit has defined "bad faith" as "arbitrary, reckless, indifferent, or intentional disregard of the interest of the person owed a duty." Benkert v. Med. Protective Co., 842 F.2d 144, 149 (6th Cir. 1988). The first King factor is an inquiry into "the degree of the opposing party's culpability or bad faith," King, 775 F.2d at 669, not merely an inquiry into the degree of a party's bad faith. Defendants' argument is therefore unpersuasive. The factor weighs in favor of an award.
Defendants do not challenge this factor. This factor weighs in favor of an award.
The third factor is the deterrent effect of an award. In this case, there is a likelihood that an award of attorney's fees would deter other fiduciaries from breaching their duties to their ERISA Plans by encouraging independent review of service fees and compensation paid by their Plans.
Defendants argue that there can be no deterrent effect in the absence of culpable conduct. That may be true in some cases. However, because the Court has determined that Defendants are culpable, Defendants' argument is unavailing.
Next, the Court asks whether Huizinga sought to confer a common benefit on other participants in the Plan or resolve a significant legal question under ERISA. Defendants concede that Huizinga sought to confer a benefit on other Plan participants. Huizinga did, in fact, confer a benefit on other Plan participants by securing the equitable remedies imposed by this Court. This factor weighs in favor of an award.
Finally, the Court considers the relative merits of the parties' positions. Because both parties sought attorney's fees in this case, the same analysis applies to both
"The primary concern in an attorney fee case is that the fee awarded be reasonable, that is, one that is adequately compensatory to attract competent counsel yet which avoids producing a windfall for lawyers." Geier v. Sundquist, 372 F.3d 784, 791 (6th Cir.2004) (internal quotation marks omitted). "The most useful starting point for determining the amount of a reasonable fee is the number of hours reasonably expended on the litigation multiplied by a reasonable hourly rate." Hensley v. Eckerhart, 461 U.S. 424, 433, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983). Once a court has established a lodestar figure, the trial court may consider other factors and adjust the award upward or downward to achieve a reasonable result. Geier, 372 F.3d at 792. Factors that a court may consider include:
Id. (internal quotation marks omitted). The party requesting attorney's fees bears the burden of establishing that the number of hours and hourly rate are reasonable. Hensley, 461 U.S. at 437, 103 S.Ct. 1933.
"To arrive at a reasonable hourly rate, courts use as a guideline the prevailing market rate, defined as the rate that lawyers of comparable skill and experience can reasonably expect to command within the venue of the court of record." Geier, 372 F.3d at 791 (citing Adcock-Ladd v. Sec'y of Treasury, 227 F.3d 343, 350 (6th Cir.2000)). In Blum v. Stenson, 465 U.S. 886, 104 S.Ct. 1541, 79 L.Ed.2d 891 (1984), the United States Supreme Court elaborated:
Id. at 895 & n. 11, 104 S.Ct. 1541. "When deciding whether a Michigan attorney's rate is reasonable, the Court relies on a combination of its own expertise and judgment, the State Bar of Michigan's Economics of Law Practice Survey, other market surveys if necessary, and the attorney's normal billing rate [which] will often show the market value of the services provided." Cmtys. for Equity v. Michigan High School Athletic Ass'n, no. 1:98-CV-479, 2008 WL 906031, at *10 (W.D.Mich. Mar. 31, 2008) (internal quotation marks and citations omitted).
In this case, Huizinga's counsel seeks an hourly rate of $350 for work through December 2011 and $375 beginning
The rate claimed is consistent with available objective indicators. According to the 2010 Economics of Law Practice survey (Ex. A, docket # 232-1, Page ID 4423-32), in 2010, the top quartile of equity shareholders in Michigan had an hourly billing rate of $350. (Id. at 4427.) The top quartile of attorneys in practice between 11 and 15 years billed at $265 per hour and the top quartile of attorneys in practice between 16 and 25 years billed at an hourly rate of $300. (Id.) The top quartile of Grand Rapids area attorneys had an hourly billing rate of $300, and the top quartile of attorneys representing plaintiffs in employment litigation had an hourly billing rate of $300. In recent years, courts in this district have approved hourly rates ranging from $280 to $440 in ERISA cases. See Moore v. Menasha Corp., no. 1:08-cv-1167, 2011 WL 811150, at *5 (W.D.Mich. Mar. 1, 2011), vacated and remanded on other grounds by 476 Fed. Appx. 77 (6th Cir.2012) (reducing the hourly rate from $400 to $300 for a plaintiff's attorney with 38 years experience); Cmtys. for Equity, 2008 WL 906031, at *9-11 (approving rates ranging from $375 to $440 based on experience); Soltysiak v. Unum Provident Corp., 480 F.Supp.2d 970, 976 (W.D.Mich.2007) (reducing the hourly rate from $350 to $280 for two attorneys with 14 and 25 years' experience, respectively); Crider v. Highmark Life Ins. Co., no. 1:05-cv-660, 2006 WL 6157958, at *5 (W.D.Mich. Nov. 21, 2006) (approving an unopposed $350 hourly rate); see also Deloach v. Great Atl. & Pac. Tea Co., no. 09-14087, 2010 WL 4683919, at *1-2 (E.D.Mich. Nov. 10, 2010) (surveying cases awarding experienced ERISA attorneys hourly rates between $350 and $400 but reducing the rate of a less experienced attorney to $325).
In 2013, Huizinga's counsel had at least 16 years of experience, predominantly in the area of employment law, including wrongful termination cases. Moreover,
The parties also dispute the reasonable number of hours expended. Huizinga has introduced records documenting a total of 726.5 in attorney hours and 86.75 paralegal hours in this case. In an effort to tailor the fee request to reflect what Huizinga won at trial and on summary judgment, counsel proposes the following method of pro-rating the attorney's fees: (1) work related to the breach of fiduciary duty claim ("BFD") at 100 percent; (2) work related to all claims ("AC") at 75 percent; (3) trial preparation and trial representation work ("TPTR") at 25 percent; and (4) exclusion of work solely related to the wrongful discharge claim ("WD") and other work not performed in furtherance of Huizinga's breach of fiduciary duty claim ("NA"). This reduces the total requested hours to 332.75 attorney hours and 22 paralegal hours.
Defendants make three central arguments in opposition to Huizinga's counsel's proposed number of hours: (1) "AC" claims should be compensated at a 25 percent rate, not 75 percent; (2) several entries are wrongly categorized as "BFD" or are unrecoverable; and (3) "TPTR" hours should be compensated at a rate of less than 25 percent.
First, Defendants argue that Huizinga should only be compensated at a rate of 25 percent for "AC" hours. Huizinga's counsel argues that a 75 percent rate is appropriate because of the factual overlap in the allegations supporting the claims. The Court agrees that there was significant factual overlap during the pleading and discovery stages, and most work would have been necessary even if the wrongful discharge and other claims did not exist. As such, the Court will use a 75 percent rate for "AC" claims. However, to the extent that Huizinga includes "AC" hours billed after June 30, 2011, the date on which the Court granted summary judgment to Defendants on Counts Three through Five, the Court will reduce the rate to 50 percent.
Defendants also argue that Huizinga wrongly classified unrelated work as "BFD" hours and included unrecoverable hours. Defendants offer four examples. First, Defendants argue that Huizinga is not entitled to the 14.5 hours counsel spent on preparation for a December 3, 2010 hearing before Magistrate Judge Brenneman. (See docket # 219-4, Page ID 3929 (entries for 11/30/10 and 12/2/10).) A careful review of the record reveals that those 14.5 hours related to five motions: Huizinga's motion to compel (docket # 26), Huizinga's motion to file a second amended complaint (docket # 29), Defendant's motion for protective order (docket # 32), Huizinga's motion to amend/correct the protective order (docket # 38), and Huizinga's motion for extension of time to complete discovery (docket #41). Huizinga prevailed in part on the motion to compel, but the magistrate judge specifically ordered
Second, Defendants argue that Huizinga wrongfully requests 3.25 "BFD" hours with respect to a motion for sanctions against Don Genzink, which Huizinga lost. (See docket ## 67-69.) Huizinga's motion for sanctions was based on Don Genzink's failure to appear for his deposition. Defendants do not deny that Don Genzink failed to appear. Although the Court ultimately denied the motion for sanctions, under the circumstances Huizinga's motion was a reasonable response and counsel should be compensated for her efforts to move litigation forward. (See docket #74.)
Third, Defendants argue that Huizinga's counsel improperly included 4.75 hours of work related to the preparation and submission of an Internal Revenue Service (IRS) complaint that was unrelated to this case. Huizinga's counsel has not offered any explanation for the inclusion of hours expended on the IRS complaint and the Court discerns none. Therefore, the Court will remove 4.75 "BFD" hours.
Fourth, Defendants contend that Huizinga's counsel improperly seeks recovery for 17 "BFD" hours for consultation with Brian Andrew, who is described in Huizinga's counsel's records as a "damage consultant." (See docket #219-4, Page ID 3938.) Defendants argue that such time should not be compensated because Huizinga testified under oath in his March 14, 2011 deposition that no experts had been consulted or retained with respect to his ERISA claims, and Huizinga's counsel disclaimed the need for an expert regarding breach of fiduciary duty claims. (See docket # 193.) Huizinga ultimately presented remedial theories on both trial issues using his own economic expertise and otherwise admitted evidence. Neither side presented outside experts, and the Court found no necessary place for outside experts in this case. But the absence of outside expert testimony does not mean the parties were precluded from using consultants to help develop and test theories of relief. That Huizinga had not consulted such help at the time of his deposition over two years before trial is neither surprising nor fatal to his recovery of the expenses now. Huizinga was free to consult a damages expert and the Court will not exclude those 17 hours from the fee calculation.
Finally, Defendants argue that Huizinga's counsel should not be compensated at a rate of 25 percent for trial preparation and representation because the portion of trial spent on the breach of fiduciary duty claim — the sole claim on which Huizinga prevailed — constituted no more than two hours of the four-day bench trial. Huizinga's counsel seeks recovery for 45 "TPTR" hours.
Defendants are correct that the breach of fiduciary duty claim constituted a small percentage of the overall trial time. Indeed,
Recalculating counsel's hours, the Court finds that the reasonable number of hours expended is 329.75 hours at an hourly rate of $350 and 123.81 hours at a rate of $375, and $3,253.13 in paralegal fees, for a total of $165,094.38 in attorney's fees.
Like attorney's fees, the Court has broad discretion to award costs to parties in ERISA actions who have shown some degree of success on the merits. See 29 U.S.C. § 1132(g)(1); Hardt, 130 S.Ct. at 2158. Huizinga's counsel has moved for itemized costs totaling $7,918.13. Defendants object to several items.
First, as above, Defendants argue that Huizinga is not entitled to a consulting fee for Brian Andrew. As previously discussed, Huizinga was free to consult Brian Andrew, and the Court will include his consulting fee in the costs.
Similarly, Defendants object to Huizinga's recovery of a consulting fee paid to attorney Tom McCarthy. Huizinga was allowed to consult McCarthy, and the Court will include his consulting fee in the costs.
Next, Defendants argue that Huizinga should not recover process server fees for trial witness Scott Burke, Kathleen Warren, or Neil Van Regenmorter. The Court agrees that Plaintiff may not collect fees related to Burke and Warren. Regarding Burke, although a party may sometimes recover fees related to a witness who did not testify, in this case Huizinga has made no showing as to Burke's necessity as a witness. See 10 Wright & Miller et al., Fed. Prac. & Proc. § 2678, at 467-68 (3d ed. 1998) ("Ordinarily, no fee may be taxed for someone who comes to the courthouse but does not testify at the trial, the presumption being that the person was not a necessary witness. But this is no more than a presumption."). Regarding Warren, the Court agrees that her testimony was only relevant to the wrongful discharge claim. As to Van Regenmorter, however, the Court will allow the costs. Van Regenmorter spoke most directly to the retaliation issues, but he was a broader witness than that. He confirmed, for example, Huizinga's frustration with getting information on 401k fees. Moreover, Van Regenmorter was the subject of a tug-of-war between the parties. Huizinga obtained a helpful affidavit from him early in the case, but he then appeared unable to testify because of medical problems. This precipitated motion practice over whether Van Regenmorter's affidavit would be admissible. There was also at least the suggestion that Defendants were active in encouraging Van Regenmorter to sit on the sidelines if he felt medical issues were a problem. Ultimately, Van Regenmorter testified and stated that visits made by Defendants to talk about his testimony were upsetting to him. In short, Van Regenmorter was a witness that was the
Finally, Defendants argue that costs designated as "AC" costs should be included at a 25 percent rate like "AC" hours. As above, the Court will allow "AC" costs at a 75 percent up to June 30, 2011, the date on which the Court granted summary judgment to Defendants on Counts Three through Five, and allow "AC" costs beyond that date at a 50 percent rate.
Huizinga's counsel is entitled to total costs of $7,660.97.
For these reasons, the Court will grant Huizinga $165,094.38 in attorney's fees and $7,660.97 in costs, for a total of $172,755.35. The Court will deny Defendants' motion for attorney's fees.
