thatattorney’s fees should be awarded to the winning party except where the loser’s position, even
though rejected by the court, had a solid basis).

However, when Plaintiff not only disregarded the Plan language requiring him to explain
the basis for his benefits claim, but then sued claiming an entitlement to benefits even though he was
unable at that time to identify a change of control that triggered rights under the Plan, his actions crossed
the line and became frivolous. See Senese, 237 F.3d at 824, 826 (finding fees warranted where
neither plaintiff nor his attorney could have reasonably believed when the complaint was filed that
the evidence supported a claim for benefits), At a minimum, Fed. R. Civ. P. 11 requires litigants
and their attorneys to possess a reasonable factual and legal basis for seeking relief. Id, at 823.
Plaintiff now says he believed the December 1999 and March 2000 corporate restructuring effected
a change of control, but could not pinpoint the exact occurrence, i.e., the March 2000 transfer of
PPMH’s shares from Holborn Delaware Partnership to Brooke Holdings, Inc., until several months
into the litigation.”

Generally, the Court would not find Plaintiff's failure to set forth all of the relevant facts
in the complaint unusual, given the notice pleading requirement of federal court. See Fed. R. Civ.
P. 8(a). However, in this instance it is clear that Plaintiff's evasive tactics allowed him to
circumvent the claims procedure which afforded the Plan administrators an opportunity to

evaluate the basis for a benefits claim, and proceed directly to federal court where he was able to

Plaintiff's original Complaint and First Amended Complaint mentioned a number of
possible changes of control, but it was not until October 2001, when Plaintiff filed a Second
Amended Complaint, that he identified the HDP-Brooke Holdings transaction as the relevant
one. However, Plaintiff neglected to specify the applicable change of control provision in the
Plan, even though the Plan listed eight specific events that could constitute a change of control,
as well as a catchall provision to cover instances where the Plan Committee deemed an event to
be so.

4.


short months after the severance negotiations ended unsuccessfully, Plaintiff sued in federal court,
claiming an entitlement to change of control benefits under the Plan.

But the Plan required Plaintiff to first submit a written application for benefits, that
specified in reasonable detail the circumstances he believed constituted a change of contro] and
identified the applicable Plan provisions, for evaluation by the Plan Administrator/Plan
Committee. (Mem. Op. at9). However, Plaintiff blatantly ignored this requirement and instead
proceeded to litigate the issue of his entitlement to benefits, asserting a futility defense to his failure
toexhaust. The Court afforded Plaintiff every benefit of the doubt, denying Defendants’ motion
to dismiss the complaint for failure to exhaust in order to allow Plaintiff an opportunity to develop
his defense. In the end, though, on cross-motions for summary judgment, the Court flatly rejected
Plaintiff's claim that further administrative review would have futile, because the evidence simply
did not support such a contention. (Mem. Op. at 8-11). The Court ultimately considered the
merits of Plaintiff's claim despite his failure to exhaust because it was clear Plaintiff could notshow
an entitlement to benefits under the Plan. (Mem. Op. at 11-13).

Nevertheless, contrary to Defendants’ beliefs, the fact that the Court found Plaintiff's futility
defense unpersuasive does not necessarily lead to a conclusion that he had no basis for pursuing
this action for benefits. Exhaustion of administrative remedies is not a requirement imposed by
the relevant statutory provision of ERISA that grants plan participants the right to sue for benefits,
29 U.S.C. § 1132(a)(1). In fact, the Seventh Circuit has expressly stated that this matter is
committed to the sound discretion of the trial court. See Lindemann v. Mobil Oil Corp., 79 F.3d 647,
650 (7th Cir. 1996), See also Mem. Op. at8. As such, the Court does not believe Plaintiff's failure
to file a claim for benefits prior to litigation, standing alone, renders his position in this lawsuit
frivolous. See Meredith v. Navistar Int'l Transp. Corp., 935 F.2d 124, 128 (7th Cir, 1991) (explaining

3.


use the discovery process to engage in a fishing expedition for the sole purpose of attempting to
identify facts upon which to base the lawsuit he had already filed. Defendants were then forced
into the position of blindly defending against a change of contro] theory Plaintiff had not yet
formulated. The Court therefore finds Plaintiff's actions were taken in bad faith for the sole
purpose of harassing Defendants who had refused to accede to Plaintiffs severance demands.

Plaintiff pleads ignorance as to the nature of the complex corporate transactions that had
taken place, explaining he simply did not understand the ramifications of the share transfers or else
he would have been able to identify the HDP-Brooke Holdings transaction as the triggering change
of control sooner. But Plaintiffs change of control theory hinged solely upon the fact that the
share transfer involved a non-corporation, Holborn Delaware Partnership, basic information
Plaintiff, as a high-level executive, was aware of prior to his termination.? (Mem. Op. at 12-13).
Thus, contrary to Plaintiff's contentions, he needed to rely on nothing more than the knowledge
he possessed long before he filed this lawsuit in order to delineate his claim for benefits under the
change of control Plan. Had Plaintiff followed the appropriate Plan procedures and presented this
claim in March 2001 when settlement negotiations broke off, the parties could have likely avoided
this costly and time-consuming lawsuit. Cf: Hess v. Hartford Life & Accident Ins, Co., 274 F.3d 456,
464 (7th Cir. 2001) (fee award upheld where plan administrator failed to consider the appropriate
information before him). Accordingly, the Court finds Plaintiff's position was not substantially
justified, and an award of fees is appropriate.

Although Plaintiff now cries poverty, his affidavit fails to support this claim. Therefore,

the Court finds that there are no special circumstances that would make an award of fees unjust.

*This transaction had also been disclosed to the public via filings with the SEC.
5.


Minute Order Form (06/97)

United States District Court, Northern District of Illinois

Nese of Aesigned Jace William J. Hibbler ee a edge John W. Darrah
CASE NUMBER 01 C 1494 DATE January 24, 2003
CASE Stark v. PPM America, Inc., et al.
TITLE
{In the following box (a) indicate the party filing the motion, e.g. plaintiff, defendant, 3rd party plaintiff, and (0) state
MOTION: briefly the nature of the motion being presented.}

Defendants’ Motion for Attorneys’ Fees and Non-Taxable Costs (#77-1)

DOCKET ENTRY:

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I§ (Other docket entry] Defendants’ motion for attorneys’ fees and non-taxable costs ([77-1] is
GRANTED. Defendants’ fee petition is due by February 3, 2003; Plaintiff’s objections are due
by February 13, 2003. Additionally, Plaintiff's motion for leayg to file a gur-reply [95-1] is
DENIED as moot. :

Filed motion of [ use listing in “Motion” box above.]
Brief in support of motion due

Answer brief to motion due . Reply to answer brief due___.

Ruling/Hearing on set for at
Status hearing (held/continued to] [set for/re-set for] on

Pretrial conference [held/ continued to] [set for/ re-set for] on

set for at

set for at

Trial [set for/ re-set for] on at
[Bench/Jury trial] [Hearing] held/continued to at

This case is dismissed [with/without] prejudice and without costs [by/agreement/ pursuant to]
OrRcP4(m) (General Rule21 OFRCP41(a)(1) OI FRCP41(a)(2).

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(For further detail see order attached to the original minute order.

No notices required, advised in open

court.

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efendants’ reasonable fees andnon-taxable

laintiff’s objections are due by

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by February 3, 2008. P

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costs. Defendants’ fee petition is to be filed

February 13, 2003.
yrissoO ORDERED.

DATED: January 24, 2003


IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION
F. JOHN STARK, III,
Plaintiff,

NO. 01 C 1494
v.

JUDGE WILLIAM J. HIBBLER
PPM AMERICA, INC.,
PPM HOLDINGS, INC., and

the AMENDED AND RESTATED
PPM HOLDINGS, INC. CHANGE OF

CONTROL SEVERANCE PLAN,
PLAN NO. 503,

DOCKETED

JAN 2 8 2003

wee ew SS SS SS SSE SS

Defendants.
MEMORANDUM OPINION AND ORDER

On September 23, 2002, this Court entered summary judgment in favor of Defendants on,
inter alia, Plaintiff's claim for benefits under a Change of Control Severance Plan. Consequently,
Defendants, as prevailing parties in an ERISA action, move for an award of attorneys’ fees and
non-taxable costs. The Court has carefully considered the submissions by the parties’, and
reviewed its Memorandum Opinion and Order (hereinafter, “Mem. Op.”) analyzing Plaintiff's
benefits claim. For the following reasons, the Court finds Plaintiff's pursuit of benefits was not
substantially justified, and therefore Defendants may recover their reasonable attorneys’ fees and

non-taxable costs incurred in defending against this action.

STANDARD OF REVIEW

Pursuant to 29 U.S.C. § 1132(g)(1) of ERISA, “the court in its discretion may allow a

‘Plaintiff seeks leave to file a sur-reply to correct what he contends are legal and factual
errors contained in Defendants’ reply brief. His request is denied. The Court is certainly
capable of analyzing the applicable case law, and fully understands the relevant facts at issue in

ze 4



reasonable attorney's fee and costs of action to either party.” Under ERISA, “there is a ‘modest
presumption’ in favor of awarding fees to the prevailing party, but that presumption may be
rebutted.” Senese v. Chicago Area I.B. of T. Pension Fund, 237 F.3d 819, 826 (7th Cir. 2001). Although
the Seventh Circuit has articulated two tests for analyzing the propriety of a fee request, Quinn v.
Blue Cross and Blue Shield Ass’n, 161 F.3d 472, 478 (7th Cir. 1998), both formulas essentially ask the
same question, i.e,, “was the losing party’s position substantially justified and taken in good faith,
or was that party simply out to harass its opponent?”, Bowerman v. Wal-Mart Stores, Inc., 226 F.3d.
574, 593 (7th Cir. 2000) (citation omitted). In other words, because the Court recognizes that
ERISA’s remedial purpose is to protect, rather than penalize participants who seek to enforce their
statutory rights, an award of fees to a successful defendant will be denied “if the plaintiff's position
was both‘substantially justified’- meaning something more thannon-frivolous, butsomething less
than meritorious- and taken in good faith, or if special circumstances make an award unjust.”
Senese, 237 F.3d at 826.
ANALYSIS

At the time Plaintiff filed this action to recover benefits under the Plan in May 2001, he had
made no real attempt to exhaust the internal remedies set forth in the Plan, Although Plaintiff and
his former employer had engaged in three months of settlement negotiations from December 2000
to March 2001 with respect to a severance package, those conversations did not entail a specific
request by Plaintiff for benefits resulting from the occurrence of a change of control as defined by
the Plan. Rather, as the Court found, the evidence presented by Plaintiff showed that he initially
made a broad demand for “payment from all benefit plans in which [he] participates,” and then
later articulated a figure of 2.5 times his salary based on a formula he believed Defendants had

been applying to severance packages for departing executives, (Mem. Op. at 9). Yet, only two

-2-