Opinion ID: 2994747
Heading Depth: 2
Heading Rank: 2

Heading: The Fund’s appeal

Text: The Fund argues on appeal that the district court erred in denying its motions for Rule 11 sanctions and for attorneys’ fees under ERISA, asserting that Senese had no legal or factual basis for his claim for 1992 benefits or for interest on unpaid and delayed benefits, and that the lawsuit was filed for an improper purpose-- namely, to obtain an advantage in the Local’s elections in favor of candidates supported by Senese.
Rule 11 authorizes a district court to impose sanctions on lawyers or parties (or both) for submissions that are filed for an improper purpose or without a reasonable investigation of the facts and law necessary to support their claims. See Fed. R. Civ. P. 11(b), (c); Fries v. Helsper, 146 F.3d 452, 458 (7th Cir. 1998); Mars Steel Corp. v. Continental Bank N.A., 880 F.2d 928, 932-33 (7th Cir. 1989) (en banc). We review the district court’s determination on Rule 11 sanctions for an abuse of discretion. Mars Steel, 880 F.2d at 933. However, deferential review does not mean automatic affirmance. In re Excello Press, Inc., 967 F.2d 1109, 1112 (7th Cir. 1992); Mars Steel, 880 F.2d at 933. While we must afford deference to the district court’s ’substantial familiarity . . . with the proceedings,’ we must also find a fair relationship between the record and the district court’s perception of the proceedings. In re Ronco, Inc., 838 F.2d 212, 218 (7th Cir. 1988) (citations omitted). A denial of sanctions based on a clearly erroneous assessment of the evidence is an abuse of discretion. See Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405 (1990); Katz v. Household Int’l, Inc., 36 F.3d 670, 673 (7th Cir. 1994). With these standards in mind, we turn now to the Fund’s three arguments in support of Rule 11 sanctions: (1) that Senese and his counsel knew or should have known that his claim for 1992 benefits was unsupported by evidence; (2) that Senese’s claim for interest on delayed and unpaid benefits was objectively unreasonable; and (3) that the lawsuit was brought for an improper purpose. First, with respect to the claim for 1992 benefits, the district court held that it was not prepared to conclude that at the time the second amended complaint was filed in this litigation, the plaintiff or his attorney had reason to believe that the allegations were not supported by evidence. We think the court’s assessment of the evidence was clearly erroneous. Under the plan and summary plan documents, a beneficiary is eligible for retirement benefits no earlier than (1) the complete cessation of covered employment and (2) his receipt of Social Security disability benefits. If these requirements are met, benefits are payable the month following the Fund’s receipt of the beneficiary’s application (although retroactive benefits may be available for delayed applications). Senese was no stranger to these plan requirements; he was plan manager and trustee for several years before his injury. And Senese had to know that the Merkel job was covered employment for purposes of pension eligibility because he successfully waged a battle with the trustees to have the Merkel job so classified. Accordingly, there can be no doubt that Senese knew that he had not completely ceased covered employment, and that, therefore, he did not meet the plan requirements for the period claimed in the complaint. In his briefs on appeal, Senese completely fails to address the question of how he could have been entitled to retirement benefits for a period before he retired./2 Instead, he argues that he had a good-faith basis for his theory that his delayed application should not have foreclosed his receipt of 1992 benefits because of the Fund’s delay in sending the application and because the summary plan description mandated retroactive benefits. But all of this is irrelevant given our conclusion that he had to have known that his continued work in covered employment independently barred his claim for 1992 benefits. Based on the facts known to Senese (and with reasonable investigation, should have been known to his lawyer), neither Senese nor his lawyer could have reasonably believed, at the time the Second Amended Complaint was filed, that the evidence supported Senese’s claim to 1992 benefits. The district court’s conclusion to the contrary was clearly erroneous, and under these circumstances, sanctions were warranted. The Fund next complains that Senese lacked a reasonable basis for his claim, under sec. 502(a)(1)(B) of ERISA, 29 U.S.C. sec. 1132(a)(1)(B), for interest on the sixteen months of benefits that were eventually awarded by the trustees after they adjusted his eligibility date to June 1993. According to the Fund, this claim was frivolous because the plan did not provide for interest on delayed benefits. Under ERISA sec. 502(a)(1)(B), which authorizes suits for unpaid benefits, plan participants or beneficiaries may not recover extracontractual damages, but instead are limited to recovering only the benefits specified in the plan. See Harsch v. Eisenberg, 956 F.2d 651, 655 (7th Cir. 1992) (citing Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 144 (1985)); Clair v. Harris Trust & Savings Bank, 190 F.3d 495, 497 (7th Cir. 1999). Accordingly, in Clair, we held that a claim solely for interest on delayed benefits could not be pursued under sec. 502(a)(1)(B) if the plan did not provide for interest, but we also held that such a claim could be brought under sec. 502(a)(3)(B) of ERISA, which allows equitable relief to address plan violations. 190 F.3d at 497-99. The Fund’s complaint, therefore, is that Senese sued under the wrong section of ERISA. However, merely invoking the wrong statutory section or legal theory would not have been fatal to Senese’s complaint. See Teumer v. General Motors Corp., 34 F.3d 542, 545 (7th Cir. 1994); Tolle v. Carroll Touch, Inc., 977 F.2d 1129, 1134 (7th Cir. 1992); Bartholet v. Reishauer A.G., 953 F.2d 1073, 1078 (7th Cir. 1992). And at the time the Second Amended Complaint was filed, there was at least some uncertainty about the viability of a claim for interest on delayed benefits under sec. 502(a)(1)(B). See Fotta v. Trs. of the United Mine Workers of Am., 165 F.3d 209, 213 n.1 (3d Cir. 1998) (declining to rule out such a claim). Of course, once that uncertainty was removed in this circuit in Clair, the claim for interest on delayed benefits under sec. 502(a)(1)(B) was no longer viable. However, it appears that neither party was aware of our decision in Clair until the eve of trial (less than a month after Clair), and under these circumstances, we think the district court was within its discretion in declining to impose sanctions. We reach the same conclusion with respect to the Fund’s argument that Senese’s request for prejudgment interest on his claim for three months of unpaid benefits was also frivolous. The Fund asserts, without analysis, that because interest is not provided for in the plan, this request under sec. 502(a)(1)(B) is also frivolous. But Clair did not address a request for prejudgment interest accompanying a claim for unpaid benefits, and a plausible argument could be made that there is a distinction for purposes of sec. 502(a)(1)(B) between an award of prejudgment interest on denied benefits and an independent action solely to recover interest on delayed benefits. See Ford v. Uniroyal Pension Plan, 154 F.3d 613, 618 (6th Cir. 1998) (Awards of prejudgment interest pursuant to sec. 1132(a)(1)(B) . . . simply compensate a beneficiary for the lost interest value of money wrongly withheld from him or her.); Cefali v. Buffalo Brass Co., 748 F. Supp. 1011, 1025 (W.D.N.Y. 1990) (noting the distinction between prejudgment interest and interest on delayed benefits); DeVito v. Pension Plan of Local 819