Opinion ID: 795275
Heading Depth: 6
Heading Rank: 1

Heading: Plaintiff appeared free to hire assistants if he so chose;

Text: 141 j. Plaintiff's services were essential to the regular business of MTA; 142 k. Plaintiff was not eligible for employee benefits in the normal course of MTA business and pursuant to the language of the CSA, which provided for remittance of the balance due under the CSA in the event of Plaintiff's extended illness or medical incapacity; and 143 l. Plaintiff's tax treatment indicated Plaintiff was not an employee, because MTA reported Plaintiff's remuneration on 1099s and not W-2s. 144 (J.A. at 103-10.) In addition to the Nationwide factors, the district court also considered Plaintiff's representation of his employment status on a social security disability benefit application. In those forms, Plaintiff asserted that he was self-employed and president of [a] one man company. (J.A. at 110.) Plaintiff further represented that he had incorporated himself and that he was receiving payment until the end of contracts that expire 12-31-00. (J.A. at 110.) 145 We find that the district court's factual findings are not clearly erroneous. We further agree with the district court that the balance of the evidence supports the conclusion that Plaintiff does not meet the definition of an employee under the common law. Plaintiff's self-representation to the Social Security Administration is compelling. When viewed in conjunction with the issuance of 1099s, Plaintiff's responsibility for his own payroll taxes, and reference to Plaintiff as an independent contractor by the CSA itself, Plaintiff is not a common law employee and therefore ineligible under an ERISA benefit plan. 146 E. The District Court Did Not Abuse its Discretion in Awarding Partial Attorneys' Fees Under 29 U.S.C. § 1132(g)(1) Against Plaintiff and in Sanctioning Plaintiff's Counsel 147 Plaintiff argues that the Court's conclusion that Plaintiff is not a common law employee, and therefore not a participant under ERISA, results in a determination that Plaintiff lacks statutory standing and that this Court therefore lacks jurisdiction under 29 U.S.C. § 1132(g)(1) to award fees against Plaintiff. In the alternative, Plaintiff argues that the district court abused its discretion in awarding attorneys fees against Plaintiff pursuant to 29 U.S.C. § 1132(g)(1). In addition, Plaintiff's attorney argues that the district court abused its discretion in sanctioning Plaintiff's attorney by holding the attorney jointly and severally liable with Plaintiff for the award of fees. Plaintiff, Plaintiff's attorney, and Lafayette also take issue with the district court's calculation of awarded fees. We reject these arguments in turn. 1. Standard of Review 148 This Court construes the terms of the ERISA statute de novo. Jordan v. Mich. Conf. of Teamsters Welfare Fund, 207 F.3d 854, 858 (6th Cir.2000). 149 This Court reviews a district court's award of attorneys' fees and costs under 29 U.S.C. § 1132(g)(1) for an abuse of discretion. See 29 U.S.C. § 1132(g)(1) ([T]he court in its discretion may allow a reasonable attorney's fees and costs . . . .). Similarly, this Court reviews a district court's decision to impose sanctions against an attorney for abuse of discretion. See 28 U.S.C. § 1927. 4 [A]n abuse of discretion exists only when the court has the definite and firm conviction that the district court made a clear error of judgment in its conclusion upon weighing relevant factors. Sec'y of Dep't of Labor v. King, 775 F.2d 666, 669 (6th Cir.1985). 150 2. The District Court Had Authority to Impose Attorneys' Fees Against Plaintiff 151 Plaintiff first argues that the district court lacked authority to impose attorneys' fees against Plaintiff because the court had found that Plaintiff was not an employee under ERISA and was therefore ineligible to recover benefits under an ERISA cause of action. Plaintiff argues that the district court's factual conclusion as to Plaintiff's status as an employee means that Plaintiff can not be a participant under § 1132(g)(1), which authorizes the award of attorneys' fees against a participant, beneficiary, or fiduciary of an ERISA plan involved in a suit under the statute. See 29 U.S.C. § 1132(g)(1). 152 We find Plaintiff's argument both self-serving and incorrect. 5 Were the Court's factual determination on the merits as to Plaintiff's status as an employee determinative of whether Plaintiff was a participant under the ERISA statute, our merits determination would render Plaintiff without statutory standing and this Court without jurisdiction to hear the case at all, a result inapposite to Supreme Court precedent, despite Judge Cook's conclusion to the contrary in her partial dissent in this case. 153 a. ERISA participants and Firestone 154 Plaintiff's action for benefits arises under 29 U.S.C. § 1132(a), which enables a benefit plan participant to enforce the substantive provisions of ERISA. The Act elsewhere defines participant as any employee or former employee of an employer . . . who is or may become eligible to receive a benefit of any type from an employee benefit plan which covers employees of such employer . . . . 29 U.S.C. § 1002(7). Plaintiff alleges that he was an employee of MTA when his disability began, making him an employee . . . who is eligible to receive a benefit . . . . and therefore a participant under ERISA with standing to sue. MTA argues that Plaintiff was an independent contractor and not an employee. Judge Cook cites to Ward v. Alternative Health Delivery Systems, 261 F.3d 624 (6th Cir.2001), for the proposition that this Court lacks subject matter jurisdiction over an ERISA suit brought by a plaintiff who lacks statutory standing. While we agree that lack of standing is determinative of the jurisdiction of this Court in an ERISA action, we do not agree that Plaintiff lacks standing in the case at bar or that this case is analogous to that cited in Ward. The Ward plaintiff argued for an extension of existing law under the corollary beneficiary standing prong of ERISA. Id. at 627. This Court refused to extend the definition of beneficiary to include health care providers. Id. This was a ruling of law, not a factual determination that the Ward plaintiff did not qualify as a beneficiary under traditional definitions. 155 Plaintiff in the case at bar is not arguing for an extension of existing ERISA standing law. Rather, Plaintiff argues that, as a matter of fact, Plaintiff was an employee when his disability began. This goes to the merits. Questions of statutory standing and cause of action often merge. This is the circumstance of the case at bar. Plaintiff alleges that he was an employee of the Defendant MTA when he became disabled. In fact, whether or not Plaintiff was an employee is determinative in the suit. It is circular to argue that because the Court has determined that Plaintiff was not an employee, Plaintiff lacked standing to sue and that this Court therefore lacks jurisdiction. Rather, Plaintiff had a colorable claim that he was an employee and that he was therefore covered by the statute. Logic dictates that the federal courts be able to reach this question. 156 The Supreme Court addressed this issue in Firestone Tire and Rubber Co. v. Bruch, 489 U.S. at 101, 109 S.Ct. 948. The Firestone Court addressed the question of statutory standing under the term participant. Id. at 115-18, 109 S.Ct. 948. The plaintiffs in Firestone were former employees of the tire manufacturer who claimed that they were entitled to benefits under a termination pay plan that Firestone had in place at the time Firestone sold the business in which plaintiffs worked. The plaintiffs argued, in part, that they were entitled to receive plan information from Firestone after Firestone sold the business unit in which the plaintiffs worked. The district court agreed with Firestone, however, that at the time plaintiffs requested the information (after the sale of the business unit in which they worked), plaintiffs were no longer participants of Firestone's ERISA plans, obviating Firestone's obligations to provide information. Id. at 107, 109 S.Ct. 948. The Third Circuit reversed the district court, reasoning that the right to request and receive information about an employee benefit plan most sensibly extend[s] both to people who are in fact entitled to a benefit under the plan and those who claim to be but in fact are not. Id. at 108, 109 S.Ct. 948 (quoting from the Third Circuit opinion). 157 On appeal, the Supreme Court rejected the Third Circuit's contention that a litigant's bald assertion of participant status ended the inquiry. Id. at 117, 109 S.Ct. 948. The Supreme Court noted that Congress did not say that all `claimants' could receive information about benefit plans. To say that a `participant' is any person who claims to be one begs the question of who is a `participant' and renders the definition set forth in § 1002(7) superfluous. Id.; see also 29 U.S.C. § 1002(7) (defining participant as any employee or former employee of an employer . . . who is or may become eligible to receive a benefit of any type from an employee benefit plan . . . .). The Supreme Court was therefore requiring the court of appeals to address the more particularized definition of participant available in the statute. 158 In remanding the case, the Supreme Court further noted that [i]n our view, the term `participant' is naturally read to mean either employees in, or reasonably expected to be in, currently covered employment . . . or former employees who have . . . a reasonable expectation of returning to covered employment or who have a colorable claim to vested benefits. Firestone Tire & Rubber, 489 U.S. at 117, 109 S.Ct. 948 (internal quotations and citations omitted). The Supreme Court expanded on its definition even further by noting that: 159 [i]n order to establish that he or she `may become eligible' for benefits, a claimant must have a colorable claim that (1) he or she will prevail in a suit for benefits, or that (2) eligibility requirements will be fulfilled in the future. This view attributes conventional meanings to the statutory language since all employees in covered employment and former employees with a colorable claim to vested benefits `may become eligible.' A former employee who has neither a reasonable expectation of returning to covered employment nor a colorable claim to vested benefits, however, simply does not fit within the phrase `may become eligible.' 160 Id. at 118-19, 109 S.Ct. 948 (internal quotations and citations omitted). The Supreme Court did not reach the question of whether the claimants qualified as participants in Firestone, preferring to leave that determination to the court of appeals upon remand. Id. at 118, 109 S.Ct. 948. 161 The logical reading of the Supreme Court's opinion in Firestone is that by failing to look to the statutory definition of participant, the court of appeals abrogated the statutory restriction on who was entitled to plan information. At minimum, the Supreme Court seemed to be saying that a litigant must claim to be an employee or former employee as a participant is defined in the ERISA statute, and in determining participant status a court must do more than take the claimant's bald assertion. It does not follow, however, that a claim for benefits which revolves around the question of whether a litigant is or was an employee under ERISA devolves into a standing issue alone. 162 Since Firestone, the Supreme Court has ruled on a case revolving around the claimant's status as an employee. See Nationwide, 503 U.S. at 318, 112 S.Ct. 1344. The posture of the parties in Nationwide was very similar to the posture in the case at bar. The plaintiff was a former insurance agent for defendant Nationwide. After Nationwide terminated the plaintiff's agency, the plaintiff brought suit under ERISA to enforce the terms of a retirement plan under which the plaintiff claimed eligibility. Id. at 320, 112 S.Ct. 1344. The proceedings in the lower court turned on whether the plaintiff qualified as an employee or former employee of Nationwide and thereby a participant eligible to claim benefits under ERISA. Id. at 321-22, 112 S.Ct. 1344. The Supreme Court held that common law agency principles applied to determine whether the plaintiff was an employee under ERISA. The Supreme Court remanded the case for the application of the correct legal standard. Id. at 328, 112 S.Ct. 1344. The Court did not imply, in any way, that a finding that the plaintiff was not an employee would function to strip the federal courts of their authority over the case. 163 b. When the merits and jurisdictional issues merge 164 While Firestone is directly on point and favors standing, we have also been instructed by the Supreme Court more generally to assume jurisdiction when statutory standing and merits questions converge. See Bell v. Hood, 327 U.S. 678, 681-82, 66 S.Ct. 773, 90 L.Ed. 939 (1946). The Fifth Circuit has summarized the meaning of that case very well as it relates to cases such as the one at bar: 165 When the basis of federal jurisdiction is intertwined with the plaintiff's federal cause of action, the court should assume jurisdiction over the case and decide the case on the merits. Bell v. Hood, 327 U.S. 678, 681-82, 66 S.Ct. 773, 90 L.Ed. 939 (1946) . . . . The question of subject matter jurisdiction and the merits will normally be considered intertwined where the [same] statute provides both the basis of federal court subject matter jurisdiction and the cause of action. Clark v. Tarrant County, Texas, 798 F.2d 736, 742 (5th Cir.1986) (citation omitted). In Williamson [ v. Tucker ], we explained that 166 no purpose is served by indirectly arguing the merits in the context of federal jurisdiction. Judicial economy is best promoted when the existence of a federal right is directly reached and, where no claim is found to exist, the case is dismissed on the merits. . . . Therefore as a general rule a claim cannot be dismissed for lack of subject matter jurisdiction because of the absence of a federal cause of action. 167 645 F.2d [404,] 415-16 [5th Cir.1981]. The basic reason for this rule is obvious. If federal jurisdiction turned on the success of a plaintiff's federal cause of action, no such case could ever be dismissed on the merits. 168 The exceptions to the rule of Bell v. Hood are that jurisdictional dismissal is proper if the federal claim clearly appears to be immaterial and made solely for the purpose of obtaining jurisdiction or where such a claim is wholly insubstantial and frivolous. Bell v. Hood, 327 U.S. at 682-83, 66 S.Ct. 773 . . . . This standard is met only where the plaintiff's claim `has no plausible foundation' or `is clearly foreclosed by a prior Supreme Court decision.' Williamson, 645 F.2d at 416 (quoting Bell v. Health-Mor, Inc., 549 F.2d 342, 344 (5th Cir. 1977)). 169 Eubanks v. McCotter, 802 F.2d 790, 793 (5th Cir.1986). 170 The Supreme Court has recently expanded on the premise of Bell v. Hood and emphasized that the courts must not extend the concept of subject matter jurisdiction, which deals with the classes of cases . . . falling within a court's adjudicatory authority, to capture other instances in which a court should dismiss or refuse to take a case. See Kontrick v. Ryan, 540 U.S. 443, 455-56, 124 S.Ct. 906, 157 L.Ed.2d 867 (2004) (distinguishing between issues of subject matter jurisdiction and claims processing rules). This Court recently reflected the Kontrick distinction in Primax Recoveries, Inc. v. Gunter, in which a panel held that a plaintiff's claim under ERISA § 1132(a)(3) was properly dismissed for failure to state a claim, and not for lack of subject matter jurisdiction, when the plaintiff sought legal relief and the statute authorized only equitable actions. 433 F.3d 515, 519-20 (6th Cir.2006). The Primax Recoveries panel further held that because the district court possessed subject matter jurisdiction over the case, even though the plaintiff failed to state a claim, the court possessed full authority to award attorneys' fees to the prevailing party under the ERISA statute. Id. at 520. The Primax panel cited to Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 89, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998), noting that dismissal for lack of subject matter jurisdiction because of the inadequacy of a federal claim is proper only when a claim is so insubstantial, implausible, foreclosed by prior decisions of this Court, or otherwise completely devoid of merit so as not to involve a federal controversy. Primax Recoveries, 433 F.3d at 519 (citing Steel Co., 523 U.S. at 89, 118 S.Ct. 1003). 171 In the instant case, Plaintiff makes at least a colorable claim that he was an employee, and therefore an ERISA participant, at the time of his disability. His claim is not so insubstantial that it fails to present a federal controversy. Steel Co., 523 U.S. at 89, 118 S.Ct. 1003. Moreover, a factual determination on the merits that Plaintiff's status was not actually that of an employee does not strip the federal courts of jurisdiction over the case. Rather, under the rules of Bell v. Hood and Steel Co., we may properly reach the merits of Plaintiff's case and retain jurisdiction to make an appropriate award of attorneys fees' as envisioned by Congress when crafting the ERISA scheme. 172 3. The District Court Did Not Abuse its Discretion in Awarding Attorneys' Fees and Costs 173 Plaintiff argues that the district court abused its discretion in awarding Defendants a portion of their attorneys' fees and costs. 174 Courts in this Circuit consider five factors in deciding ERISA attorneys' fees questions: 175 (1) the degree of the opposing party's culpability or bad faith; 176 (2) the opposing party's ability to satisfy an award of attorneys' fees; 177 (3) the deterrent effect of an award on other persons under similar circumstances; 178 (4) whether the party requesting fees sought to confer a common benefit on all participants and beneficiaries of an ERISA plan or resolve significant legal questions regarding ERISA; and 179 (5) the relative merits of the parties' positions. 180 King, 775 F.2d at 669. The district court addressed each of these factors in turn. The district court found, first and foremost, that Plaintiff did not litigate in good faith. While Plaintiff presented a colorable claim for benefits, Plaintiff asserted a number of near frivolous claims against both Defendants, Plaintiff refused to dismiss claims against one Defendant or another once it became clear which was the proper Defendant for that claim, and Plaintiff unnecessarily prolonged litigation by filing unreliable briefs and pursuing arguments even after their rejection by the court. In addition, the district court found that Plaintiff improperly took quotations out of context and made strained arguments based upon such misinterpreted citations. (J.A. at 2548.) 181 We find that the district court's conclusions are supported by the record. For example, after the parties agreed that MTA was the plan administrator while Lafayette was the claims administrator, Plaintiff refused to dismiss his claim for benefits against MTA and refused to dismiss his claim for failure to turn over plan documents against Lafayette. The case law is very clear about who is a proper party defendant for each of these claims. The district court need not determine that the entire matter was pursued in bad faith to find some level of culpability on the part of Plaintiff for the unnecessary scope of litigation. 182 Plaintiff further argues that the district court had insufficient basis to reach a conclusion that Plaintiff could afford to pay the imposed attorneys' fees. The district court based its conclusion on the fact that Plaintiff had reported approximately half a million dollars in income in 1998 and 1999. Plaintiff presented no evidence to the district court, and indeed presents no evidence to this Court, in support of his contention that he cannot pay the fees. 183 Plaintiff next argues that the district court is improperly deterring colorable claims for benefits by awarding partial attorneys' fees against Plaintiff. Plaintiff's argument is without merit. While there is no presumption of award of attorneys' fees to the prevailing party in an ERISA action, see Schwartz v. Gregori, 160 F.3d 1116, 1119-20 (6th Cir.1998), the district court's objective was not to deter plaintiffs from bringing colorable claims for benefits, but from unnecessarily expanding the scope and complexity of litigation. Finally, the district court considered that the fourth King factor was inapplicable, and that the fifth factor favored Defendants because many of Plaintiff's subclaims were either duplicative or lacked merit. 184 This Court is not left with a definite and firm conviction that the district court made a clear error of judgment. We have reviewed Plaintiff's briefs to the district court and agree with the district court that the briefs were relatively unreliable, an unreliability that continued in Plaintiff's briefs to this Court. In addition, Plaintiff continued to pursue claims against both Lafayette and MTA when the record had become clear that one or the other was not a proper defendant for some of Plaintiff's subclaims, despite the communication of relevant and clear legal authority for the dismissal of one defendant or the other to Plaintiff's counsel. The district court did not abuse its discretion in awarding attorney fees' against Plaintiff. 185