164 F.Supp.3d 705
Regional Employers' Assurance Leagues Voluntary Employees' Beneficiary Association Trust
v.
Gretchen Hutto Castellano
CIVIL ACTION NO. 03-6903
United States District Court, E.D. Pennsylvania.
Signed February 10, 2016
Jeanne D. Bonney, Norristown, PA, for Regional Employers' Assurance Leagues Voluntary Employees' Beneficiary Association Trust.
Ira B. Silverstein, The Silverstein Firm, Philadelphia, PA, for Gretchen Hutto Castellano.
MEMORANDUM AND ORDER
ELIZABETH T. HEY, United States Magistrate Judge
I. FACTS AND PROCEDURAL HISTORY
Defendant/Counter Claimant (“Mrs. Castellano”) has filed a motion for attorneys' fees in this ERISA action. The facts and procedural background are long and sordid and discussed at length in the August 24, 2015 decision issued by the Honorable Mary McLaughlin granting summary judgment to Mrs. Castellano against the counterclaim defendants1 on her Section 502(a)(1)(B) claim for benefits under her husband's welfare benefit plan, the Regional Employers' Assurance League Voluntary Employees' Beneficiary Association (“REAL VEBA”). See Doc. 351. As explained in Judge McLaughlin's opinion, Domenic M. Castellano, D.D.S., Mrs. Castellano's husband, owned a dental practice which joined the REAL, an unincorporated association of employers who adopted a benefit structure for their employees' under the REAL's welfare benefit plan. Id. at 6-7. The assets of the REAL are held in trust by the REAL VEBA. Id. The Trust and all of the adoption documents were authored by John Koresko, V., an attorney and public accountant. Id. at 4.
Dr. Castellano purchased a $750,000 flexible premium adjustable life insurance policy for his dental practice through the REAL, which named the Trustee of the REAL VEBA Trust as beneficiary. See
Doc. 351 at 8-9. Penn-Mont, a corporate affiliate of the law firm of Koresko & Associates, P.C., was the plan administrator. Id. at 4, 5. Upon Dr. Castellano's death in 2003, the REAL VEBA Trust received a check for $751,266.18 in life insurance proceeds. Id. at 9. Mrs. Castellano submitted a REAL VEBA Death Benefit Form naming her as Dr. Castellano's beneficiary. Id. at 10. In response, Penn-Mont gave Mrs. Castellano a choice—ten annual payments of $75,000 or a lump-sum payment of $597,560.14. Id. at 11. Mrs. Castellano demanded a lump-sum payment of $750,000, and, in response, Penn-Mont filed a declaratory judgment action against Mrs. Castellano. Id. at 12-13. On June 29, 2005, Penn-Mont denied Mrs. Castellano's claim for benefits. Id. at 13.
On August 24, 2015, more than twelve years after Dr. Castellano's death and the submission of the Death Benefit Form, and nearly twelve years after the inception of this lawsuit, Judge McLaughlin granted summary judgment to Mrs. Castellano on her counterclaim for violation of ERISA section 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B), and ordered the Trust to pay Mrs. Castellano $750,000. See Doc. 351 at 30.2
Mrs. Castellano, by her attorney Ira B. Silverstein, has filed a motion for attorneys' fees and costs totaling $1,009,905.85, which includes a request for a 25% upward adjustment. See Doc. 353. The Honorable Wendy Beetlestone, to whom the case is now assigned, has referred the motion to the undersigned. Doc. 358. The motion is supported by Mr. Silverstein's affidavit and voluminous detailed time records. Docs. 353-2 through 353-7.3 The Koresko Entities have not responded to the motion. I directed the DOL to respond and it has opposed the motion in part, arguing that the attorneys' fees and costs should not be borne by the REAL VEBA or, if they are, should receive no priority above the equitable distribution upon which the court will decide after the accounting process is completed. See Docs. 359, 363 at 1-2. Additionally, although it does not address any of the billing entries, the DOL argues that the court should reduce the fees and costs to those related to work performed on the single claim under which Mrs. Castellano obtained relief. Id. at 2. Mrs. Castellano has submitted a reply in support. Doc. 364.
II. LEGAL STANDARDS
The first step in considering an award of attorneys' fees in an ERISA case
is to determine whether the claimant achieved “some degree of success on the merits.” Hardt v. Reliance Standard Life Ins. Co. , 560 U.S. 242, 255, 130 S.Ct. 2149, 176 L.Ed.2d 998 (2010).
The second step in an ERISA attorneys' fees analysis is to determine whether attorneys' fees should be awarded. Although “there is no presumption that a successful plaintiff in an ERISA suit should receive an award [of attorneys' fees] in the absence of exceptional circumstances,” McPherson v. Employees' Pension Plan of Am. Re–Ins. Co., Inc. , 33 F.3d 253, 254 (3d Cir.1994), the Third Circuit has acknowledged that ERISA defendants often bear the burden of attorneys' fees for a prevailing plaintiff. Brytus v. Spang & Co. , 203 F.3d 238, 242 (3d Cir.2002).
The Third Circuit has developed a list of factors to be considered in making the determination of whether an award of attorneys' fees is appropriate: (1) the offending parties' culpability or bad faith; (2) the ability of the offending parties to satisfy an award of attorneys' fees; (3) the deterrent effect of an award of attorneys' fees against the offending parties; (4) the benefit conferred on members of the pension plan as a whole; and (5) the relative merits of the parties' positions. Ursic v. Bethlehem Mines , 719 F.2d 670, 673 (3d Cir.1983). Although the court may consider other factors, at a minimum “it must articulate its considerations, its analysis, its reasons and its conclusions touching on each of [the Ursic ] factors.” McGuffey v. Brink's, Inc. , 594 F.Supp.2d 553, 555 (E.D.Pa.2009) (Brody, J.) (quoting Anthuis v. Colt Indus. Operating Corp. , 971 F.2d 999, 1012 (3d Cir.1992) ). Moreover, the Ursic factors are not a rigid test. They provide a useful framework to analyze a motion for attorneys' fees. Fields v. Thompson Printing Co. , 363 F.3d 259, 275 (3d Cir.2004). “[N]o one of [the] factors is decisive, and some may not be apropos in a given case, but together they are the nuclei of concerns that a court should address” in considering an award of attorneys' fees in an ERISA case. Viera v. Life Ins. Co. of No. Am. , Civ. No. 09–3574, 2013 WL 3199091, at *2 (E.D.Pa. June 25, 2013) (Robeno, J.).
If the court determines attorneys' fees should be awarded, the final step in the analysis requires the court to “review the attorneys' fees and costs requested and limit them to a reasonable amount.” Hardt , 560 U.S. at 249, 130 S.Ct. 2149 ; see also Viera , 2013 WL 3199091, at *2.
III. ANALYSIS
I note that the DOL “does not take issue with Castellano's contention that she is entitled to some award of attorney's fees and costs based on the former fiduciaries' arbitrary and capricious denial of her benefits claim.” Doc. 363 at 1. However, the Third Circuit has determined that full analysis of the Ursic factors is necessary in determining the propriety of a fee award. McGuffey , 594 F.Supp.2d at 555 (quoting Anthuis , 971 F.2d at 1012 ).
1. Degree of Success
There can be no doubt that Mrs. Castello achieved “some degree of success” in this action. From the outset, she sought the full amount of the plan benefit to which she was entitled after her husband's death. She achieved it.
2. Ursicors
a. Culpability and Bad Faith
In determining whether an award of attorneys' fees is warranted, the court must consider the offending parties' culpability or bad faith. Ursic , 719 F.2d at 673. “[B]ad faith normally connotes an ulterior motive or sinister purpose.”
McGuffey , 594 F.Supp.2d at 556 (quoting McPherson v. Employees' Pension Plan of Am. Re–Ins. Co. , 33 F.3d 253, 256 (3d Cir.1994) ). “ ‘[C]ulpable conduct’ means ‘conduct that is blameable; censurable;...at fault; involving a breach of a legal duty or the commission of a fault.’ ” Id. (quoting Black's Law Dictionary 96th ed. 1990).
Considering the litany of fiduciary breaches outlined in Judge McLaughlin's February 6, 2015 Memorandum in the related Perez case, see Civ. No., Doc. 1134, and the procedural irregularities, delay, and abuse of discretion detailed in Judge McLaughlin's August 24, 2015 Memorandum in this case, see Doc. 351, I conclude that the offending parties acted in bad faith. This factor favors an award of fees.
b. Ability to Satisfy an Award of Attorneys' Fees
As Mrs. Castellano's counsel concedes, analysis of this factor is “somewhat more complicated.” Doc. 353-8 at 6. Ursic speaks in terms of the offending parties' ability to satisfy an award of attorneys' fees. 719 F.2d at 673. Here, the offending parties are the Koresko Entities who were the fiduciaries who delayed and ultimately denied Mrs. Castellano's claim. Judge McLaughlin removed them from any contact with the Trusts and ordered certain of them to disgorge and repay the Trusts $19,852,114.88 in the Perez case (the court took control of an...
