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Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 

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*

  After examining the briefs and the record, we have concluded that oral argument is

unnecessary.  Thus the appeal is submitted on the briefs and the record.  See FED. R. APP. P.

34(a)(2).  

United States Court of Appeals

For the Seventh Circuit

Chicago, Illinois 60604

Submitted March 3, 2010*

Decided March 9, 2010

Before

                     JOEL M. FLAUM, Circuit Judge

MICHAEL S. KANNE, Circuit Judge

ILANA DIAMOND ROVNER, Circuit Judge

No. 09‐3394

JAMES HESS & JOHN HESS,

           Plaintiffs,

v.

REG‐ELLEN MACHINE TOOL CORP.,

EMPLOYEE STOCK OWNERSHIP

PLAN, et al.,

Defendants‐Appellees.

APPEAL OF: MICHAEL HAVRILESKO.

Appeal from the United States District

Court for the Northern District of Illinois,

Western Division.

No. 3:07‐cv‐50074

Frederick J. Kapala,

Judge.

O R D E R

This is the fourth lawsuit brought in federal court by Michael Havrilesko on behalf of

his clients, John and James Hess, against Reg‐Ellen Machine Tool Corporation and its

NONPRECEDENTIAL DISPOSITION

To be cited only in accordance with

Fed. R. App. P. 32.1

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No. 09‐3394 Page 2

Employee Stock Ownership Plan (ESOP) arising out of changes in the value of their

retirement accounts.  After prevailing yet again on summary judgment, the defendants were

awarded attorneys’ fees.  Havrilesko now contests that fee award.  We affirm.

In 2000 and 2002, the Hesses, former employees of Reg‐Ellen, sued Reg‐Ellen and its

ESOP claiming that they ignored the Hesses’ investment requests, thereby violating the plan

and the Employee Retirement and Income Security Act (“ERISA”).  See 29 U.S.C.

§ 1132(a)(1)(B).   Those two suits were consolidated into a single case.  The district court

granted summary judgment for the defendants, concluding that the defendants’ actions

were not arbitrary or capricious and thus in accord with the terms of the plan.  We affirmed.

Hess v. Reg‐Ellen Mach. Tool Corp. (Hess I), 423 F.3d 653, 666 (7th Cir. 2005).  The Hesses sued

the company and the plan again, claiming this time that the defendants improperly denied

the Hesses’ requests to rollover their accounts into a new plan, to segregate and liquidate

their accounts, and to diversify their investments.  The district court granted summary

judgment for the defendants, and we affirmed again, stating, “We trust that this is the last

time that we, or any other court, will be seeing this case: two lawsuits are enough.”  Hess v.

Reg‐Ellen Mach. Tool Corp. Employee Stock Ownership Plan (Hess II), 502 F.3d 725, 730 (7th Cir.

2007).

But we spoke too soon.  Less than a month after arguing Hess II in our court, the

plaintiffs filed another suit asserting that the defendants’ denial of their diversification and

segregation requests constituted a breach of their fiduciary duty.  The district court granted

summary judgment for the defendants because res judicata barred the Hesses’ claim.  It also

ruled that even if it addressed the merits, their claim failed.   

The district court next granted the defendants’ request for $46,054.70 in attorneys’

fees incurred after Hess II, see N.D. ILL. R. 54.3, to be split equally by the Hesses and their

attorney, Havrilesko.  The court concluded fees were proper under 29 U.S.C. § 1132(g)(1):

the Hesses’ claim was not substantially justified because it was barred by res judicata; it was

not maintained in good faith because the Hesses pressed on with this suit in spite of our

warning in Hess II; and no special circumstances made an award of fees unjust.

Additionally, the court concluded fees were proper under 28 U.S.C. § 1927 because the

Hesses’ attorney multiplied proceedings unreasonably and vexatiously.  

ERISA authorizes the award of reasonable attorneys’ fees to the prevailing party and

we recognize a modest, rebuttable presumption in favor of awarding these fees. See 29

U.S.C. § 1132(g)(1); Laborersʹ Pension Fund v. Lay‐Com, Inc., 580 F.3d 602, 615 (7th Cir. 2009);

Herman v. Central States, Se. & Sw. Areas Pension Fund, 423 F.3d 684, 695‐96 (7th Cir. 2005).  A

party is entitled to attorneys’ fees unless the loser had “substantial justification” in bringing

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suit.  See Sullivan v. William A. Randolph, Inc., 504 F.3d 665, 672 (7th Cir. 2007).  This means

that the losing party’s position is more than nonfrivolous, though less than meritorious.

Herman, 423 F.3d at 696; Harris Trust & Sav. Bank v. Provident Life & Accident Ins. Co., 57 F.3d

608, 617 n.4 (7th Cir. 1995).  

Havrilesko urges us to review the fee award de novo based on his belief that “the

standard of review for a district court’s findings in a fee petition case should be the same as

that for summary judgment.”  It’s not.  We review a grant of attorneys’ fees under both 29

U.S.C. § 1132(g)(1) and under 28 U.S.C. § 1927 for an abuse of discretion.  See Laborersʹ

Pension Fund, 580 F.3d at 615 (29 U.S.C. § 1132(g)(1)); Dal Pozzo v. Basic Mach. Co., 463 F.3d

609, 614 (7th Cir. 2006) (28 U.S.C. § 1927).  And we’ve explained why: the district court is in

a superior position to understand the litigation, and we want to avoid excessive intrusion

into what are essentially factual matters.  See Robinson v. City of Harvey, 489 F.3d 864, 872

(7th Cir. 2007); Divane v. Krull Elec. Co., 319 F.3d 307, 314 (7th Cir. 2003).

Havrilesko contends that he was substantially justified in bringing the current case

because our decision in Harzewski v. Guidant Corp., 489 F.3d 799, 806 (7th Cir. 2007), held

that a former pension plan participant may sue a plan administrator for breach of fiduciary

duty.  But just as nothing prohibited the plaintiffs in Harzewski from bringing their

fiduciary‐duty claims under our pre‐Harzewski case law, nothing barred the Hesses from

doing so in their earlier lawsuits.  Because they could have brought this claim earlier, res

judicata bars it.  See Hicks v. Midwest Transit, Inc., 479 F.3d 468, 471 (7th Cir. 2007); Simon v.

Allstate Employee Group Med. Plan, 263 F.3d 656, 658 (7th Cir. 2001); 4901 Corp. v. Town of

Cicero, 220 F.3d 522, 529 (7th Cir. 2000).

Havrilesko next contends that because he supplied an undisputed affidavit asserting

that the defendants told him he that could bring “additional” claims, he created a genuine

issue whether the defendants were “equitably estopped” from raising the res judicata

defense.  As the district court correctly concluded, this argument was frivolous because this

lawsuit contained no “additional” claims.  A “claim” consists of the underlying factual

events rather than the legal theories advanced.  Alvear‐Velez v. Mukasey, 540 F.3d 672, 677

(7th Cir. 2008); Bethesda Lutheran Homes & Servs., Inc. v. Born, 238 F.3d 853, 857 (7th Cir.

2001).  Because the Hesses pressed only a new theory on the same underlying facts, they

raised no additional claims.

Next, Havrilesko attacks the district court’s conclusion that he disregarded in bad

faith our warning in Hess II against more litigation because we issued the warning after he

filed this suit.  But the court did not conclude that he exhibited bad faith by initiating this

suit before Hess II, but by maintaining it after. Attorneys are under a continuing duty to

dismiss a claim that is no longer viable.  See Jolly Group, Ltd. v. Medline Indus. Inc., 435 F.3d

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No. 09‐3394 Page 4

717, 720 (7th Cir. 2006); Burda v. M. Ecker Co., 2 F.3d 769, 778 (7th Cir. 1993).  The district

court issued attorneys’ fees only for the time after Hess II.  On this basis, we cannot find an

abuse of discretion.  See Stark v. PPM Am., Inc., 354 F.3d 666, 673 (7th Cir. 2004).

Havrilesko also asserts that because he submitted an unrebutted affidavit attesting

that he could not afford to pay, the court improperly concluded an award of fees was

warranted.  But the court permissibly ruled that his affidavit did not give it an adequate

basis to find an inability to pay: he attached no bank statements or tax returns, and failed to

disclose whether he had any alternate sources of income.  Stark, 354 F.3d at 673‐74.  The

court therefore properly concluded that Havrilesko—who bore the burden of showing

special circumstances, see Stark, 354 F.3d at 673‐74; Prod. & Maint. Employees’ Local 504 v.

Roadmaster Corp., 954 F.2d 1397, 1404 n.1 (7th Cir. 1992); see also Martin v. Ark. Blue Cross &

Blue Shield, 299 F.3d 966, 969‐70 (8th Cir. 2002)—did not qualify for relief.  See Stark, 354 F.3d

at 673‐74.  And in any case, “a lawyer’s ability to pay does not affect the appropriate award

for a violation of § 1927,” Shales v. Gen. Chauffeurs Local 330, 557 F.3d 746, 749 (7th Cir. 2009);

see also Hamilton v. Boise Cascade Express, 519 F.3d 1197, 1206 (10th Cir. 2008), which was one

of the two statutory bases for the fee award.

Finally, the defendants have asked for fees on appeal, and because this appeal is just

as frivolous as the district court litigation, they are entitled to them.  See Bandak v. Eli Lilly &

Co. Ret. Plan, 587 F.3d 798, 802‐03 (7th Cir. 2009); Sullivan, 504 F.3d at 672.  The defendants

should submit within 14 days an itemized statement of the attorneys’ fees that they incurred

in defending the appeal, and Havrilesko will have 14 days to respond.

Accordingly, we AFFIRM the judgment of the district court.

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