In the

United States Court of Appeals

For the Seventh Circuit ____________

No. 04-4169

GARY L. BENDER and RENEE BENDER,

Plaintiffs-Appellees,

v.

GRETCHEN M. FREED,

Defendant-Appellee,

and

BERGQUIST COMPANY EMPLOYEE HEALTH PLAN,

Defendant,

Third/Party Plaintiff-Appellant,

v.

PHILLIP TODRYK and TODRYK LAW OFFICE,

Third/Party Defendants-Appellees.

____________

Appeal from the United States District Court

for the Western District of Wisconsin.

No. 04 C 10—John C. Shabaz, Judge.

____________

ARGUED JUNE 7, 2005—DECIDED FEBRUARY 2, 2006

____________

Before EASTERBROOK, KANNE, and SYKES, Circuit Judges.
2 No. 04-4169

SYKES, Circuit Judge. The Bergquist Company Health

Plan prevailed on an ERISA-based reimbursement claim in

the district court and sought attorneys’ fees pursuant

to ERISA, 29 U.S.C. § 1132(g), and also under 28 U.S.C.

§ 1927, which permits the district court to award attorneys’

fees as a sanction against an attorney who “multiplies the

proceedings in any case unreasonably and vexatiously.” The

district court denied the request for fees, holding that the

ERISA fees motion was untimely and the alleged vexatious

conduct by counsel predated the present litigation and

therefore was not covered by § 1927. We affirm.

I. Background

Plaintiff Gary Bender’s health insurance was provided

through the Bergquist Company Health Plan (“the Plan”),

an employee welfare benefit plan for purposes of ERISA, 29

U.S.C. § 1002(1). In December 2002 Bender was injured when his car collided with a vehicle driven by defendant Gretchen Freed. The Plan paid some $23,000 for

Bender’s medical expenses related to the accident; under

the terms of the plan, it retained a subrogated interest

in any damages Bender might later recover.

Believing the accident was Freed’s fault, Bender retained

an attorney, third-party defendant Phillip Todryk, who

presented a claim to Freed’s liability insurer. Prior to

any litigation, Freed’s insurance company settled Bender’s

claim for its policy limit of $50,000. Bender and Todryk

apparently divvied up the money and did not inform the

Plan that Freed’s insurer had paid a settlement.

In November 2003 Bender and his wife, represented by

Attorney Todryk, commenced the present action against

Freed and the Plan in Wisconsin state court. The complaint

sought additional damages against Freed and a declaration

that the Plan was not entitled to reimbursement for the

payments it made for Bender’s medical treatment. The Plan
No. 04-4169 3

removed the case to federal court under the auspices of

ERISA, counterclaimed for reimbursement of the medical

payments, and added Todryk to the case as a third-party

defendant on the theory that he was in possession of a

portion of the $50,000 already received in the settlement

with Freed’s insurer.

The Plan moved for summary judgment on its counterclaim for reimbursement and requested attorneys’ fees

pursuant to 29 U.S.C. § 1132(g), which authorizes the court

to award fees, in its discretion, to the prevailing party in an

ERISA action. The court granted summary judgment to the

Plan on the reimbursement claim but declined to award fees

because the Plan “failed to demonstrate why it is entitled to

attorneys’ fees.” The Benders then settled with Freed for

$65,000, ending the substantive portion of the case.

Final judgment was entered in favor of the Plan on its

reimbursement claim on August 24, 2004. Thirty-four days

later, on September 27, 2004, the Plan filed a second motion

seeking attorneys’ fees from Bender and Todryk under

§ 1132(g) and added a claim for fees against Todryk pursuant to 28 U.S.C. § 1927, which authorizes the district court

to award attorneys’ fees as a sanction against an attorney

who unreasonably and vexatiously multiplies the proceedings before it.

The district court denied the Plan’s motion for fees. With

respect to the 29 U.S.C. § 1132(g) claim, the court held that

the motion was untimely under FED. R. CIV. P. 54(d)(2)(B),

which requires such motions to be filed within 14 days after

entry of judgment. The court also held that § 1927 did not

apply because the Plan’s allegations against Todryk related

solely to his prelitigation conduct in failing to inform the

Plan of the original $50,000 insurance settlement, not a

vexatious “multiplication” of federal court proceedings that

would be sanctionable under the statute.
4 No. 04-4169

II. Discussion

A. Applicability of Rule 54(d)(2)

The Plan first claims that the district court erred in

applying the 14-day time limit of Rule 54(d)(2)(B) to its

claim for fees made pursuant to ERISA. The applicable

section of ERISA, 29 U.S.C. § 1132(g)(1), provides: “In any

action under this subchapter[,] . . . the court in its discretion may allow a reasonable attorney’s fee and costs of

action to either party.” The pertinent text of FED. R. CIV. P.

54(d) provides:

(2) Attorneys’ Fees

(A) Claims for attorneys’ fees and related nontaxable expenses shall be made by motion unless

the substantive law governing the action provides

for the recovery of such fees as an element of damages to be proved at trial.

(B) Unless otherwise provided by statute or order of

the court, the motion must be filed no later than 14

days after entry of judgment . . . . (emphasis added)

The Plan argues that Rule 54(d)(2) does not apply to

claims for attorneys’ fees made pursuant to ERISA because

the fee provision contained in § 1132(g) is part of the

“substantive law governing the action” rather than an

element of “costs.” This argument ignores certain qualifying

language in the rule as well as case law in this circuit holding Rule 54(d)(2) applicable to attorneys’ fees

motions in ERISA cases.

Rule 54(d)(2) requires that claims for attorneys’ fees shall

be made by motion filed within 14 days after entry

of judgment unless (1) a statute or order of the court

provides a different deadline, or (2) the “substantive law

governing the action provides for the recovery of such fees

as an element of damages to be proved at trial.” Neither

exception applies here. The Plan has not identified any
No. 04-4169 5

1 We note the Advisory Committee Notes for the 1993 amendment that added subdivision (d)(2) to Rule 54 state, “This new

paragraph establishes a procedure for presenting claims for

attorneys’ fees, whether or not denominated as ‘costs.’ ”

other applicable statutory or court-imposed deadline, nor

does it contend that attorneys’ fees under § 1132(g) are

an “element of damages to be proved at trial.” Arguing that

attorneys’ fees under ERISA are “substantive” and “not

costs” adds nothing to the analysis.1

 Moreover, this

court has previously held that “an attorney’s fee award

under section 1132(g)(1) should be sought . . . by filing a

motion under Rule 54(d).” Bittner v. Sadoff & Rudoy Indus.,

728 F.2d 820, 828 (7th Cir. 1984). The Plan does not argue

that Bittner is distinguishable or should be revisited.

The Plan’s fallback position is that even if the motion was

untimely under Rule 54, the district court should have

considered it anyway because “all parties were well

aware of the Plan’s intention to file a motion for attorneys’ fees long before the entry of judgment,” and that

discussions during a telephonic pretrial conference “left

no room for doubt that the Motion would be filed postjudgment.” This is not a legal argument; it is an appeal to

fairness based upon an asserted absence of prejudice, but

without a corresponding claim that compliance with the

deadline imposed by Rule 54(d)(2) was impossible or

impracticable or that the Plan’s noncompliance was for

some reason excusable. We are not persuaded. The Plan

missed the deadline under Rule 54(d)(2) and offers no

reason for having done so. The fact that the parties

were “well aware” that the Plan intended to file a fees

motion at some indeterminate date in the future does not

excuse noncompliance with the applicable procedural rules.

The district court properly held that the Plan’s motion for

fees pursuant to § 1132(g) was untimely under Rule

54(d)(2).
6 No. 04-4169

B. Sanctions for Vexatious Litigation

The Plan also sought an award of attorneys’ fees against

Todryk under the authority of 28 U.S.C. § 1927, which

provides that “[a]ny attorney . . . who so multiplies the

proceedings in any case unreasonably and vexatiously

may be required by the court to satisfy personally the

excess costs, expenses, and attorney’s fees reasonably

incurred because of such conduct.” This statute is inapplicable here because the alleged “unreasonable and vexatious”

conduct by Todryk—namely, his failure to inform the Plan

about the original settlement from Freed’s

insurer—occurred well before this litigation was commenced.

By its terms, § 1927 permits the district court to award

attorneys’ fees as a sanction against an attorney who

unreasonably and vexatiously “multiplies the proceedings in

any case.” It applies, therefore, to misconduct by

an attorney in the course of “proceedings” in a “case” before

the court, not misconduct that occurs before the case

appears on the federal court’s docket. That is, the statute

provides a discretionary sanction against attorneys who

abuse the judicial process, not those who engage in improper conduct in the runup to litigation. “To be liable

under section 1927, counsel must have engaged in ‘serious

and studied disregard for the orderly process of justice.’ ”

Knorr Brake Corp. v. Harbil, Inc., 738 F.2d 223, 226 (7th

Cir. 1984) (quoting Overnight Transp. Co. v. Chi. Indus.

Tire Co., 697 F.2d 789, 795 (7th Cir. 1983) (in turn quoting

Kiefel v. Las Vegas Hacienda, Inc., 404 F.2d 1163, 1167 (7th

Cir. 1968), cert. denied, 395 U.S. 908 (1969))).

The Plan argues that Trodyk’s conduct should be

sanctionable under § 1927 because it constituted a violation

of a professional duty imposed by the Rules of Professional

Conduct governing attorneys in Wisconsin. The Plan cites

Wisconsin Supreme Court Rule 20:1.15(d)(1), which re-
No. 04-4169 7

quires an attorney who receives funds in which a client or

a third person has an interest to “promptly notify the client

or third person in writing” and to “promptly deliver to the

client or third person any funds . . . that the client or third

person is entitled to receive.” But § 1927 does not provide a

generalized substantive remedy for attorney misconduct

wherever and in whatever context it may occur. It provides

a remedy for bad faith misconduct by an attorney in the

pursuit of a case in court. See TCI Ltd. v. Needler & Assocs.,

Ltd., 769 F.2d 441, 445-46 (7th Cir. 1985). “The principle

underlying § 1927, Rule 11, and the bad faith exception to

the American Rule is that in a system requiring each party

to bear its own fees and costs, courts will ensure that each

party really does bear the costs and does not foist expenses off on its adversaries.” Id. at 446.

Here, the Plan’s claim against Todryk under § 1927 is

premised entirely on his failure to notify it of the

prelitigation insurance settlement. This conduct occurred before litigation was commenced and did not

“multipl[y] the proceedings” in this case. The district court

correctly concluded that the fee-shifting sanction of § 1927

does not apply.

The judgment of the district court is AFFIRMED.
8 No. 04-4169

A true Copy:

Teste: 

 ________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit 

USCA-02-C-0072—2-2-06