Court Opinion

ID: 9494525
Source: CourtListenerOpinion
Date Created: 2023-08-05 15:39:27.22801+00
Date Added: 2024-06-11T17:56:27.109474
License: Public Domain

BYE, Circuit Judge,
concurring.
I agree with the majority opinion in all respects. I write separately to discuss what I believe is an incompatibility between the five-factor test and the special circumstances presumption, both of which have been adopted by this circuit.
I begin by recounting the history of our adoption of both the special circumstances presumption, and the five-factor test. Congress enacted ERISA with a fee-shifting provision, see 29 U.S.C. § 1132(g)(1) (“the court in its discretion may allow a reasonable attorney’s fee and costs of action to either party”), that unfortunately provided little guidance to courts on how to exercise their discretion in awarding fees. Faced with this problem, the Tenth Circuit created a balancing test for deciding whether prevailing ERISA plaintiffs should receive attorney’s fees. The test considers:
(1) the degree of the offending parties’ culpability or bad faith;
(2) the degree of the ability of the offending parties to personally satisfy an award of attorneys fees;
(3) whether or not an award of attorneys fees against the offending parties would deter other persons acting under similar circumstances;
(4) the amount of benefit conferred on members of the pension plan as a whole; and
(5) the relative merits of the parties’ position.
Eaves v. Penn, 587 F.2d 453, 465 (10th Cir.1978) (the Eaves five-factor test).
The Eaves five-factor test has been criticized as being “an unhelpful method for determining the appropriateness of awards to prevailing plaintiffs in ERISA actions.” Mark Berlind, Attorney’s Fees under ERISA: When is an Award Appropriate ?, 71 Cornell L.Rev. 1037, 1058 (1986). Various criticisms of the five-factor test include (a) the superfluous nature of the first factor, since courts already have the inherent ability to shift fees because of bad faith, (b) the fact that the second factor does not apply to most ERISA situations, because an ERISA plan typically pays the fees of a prevailing party rather than the plan administrators personally, and (c) ERISA already provides strict fiduciary standards that accomplish the goals of the third factor, deterrence. See id. at 1058-61; see also Cent. States S.E. & S.W. Areas Pension Fund v. Hitchings Trucking, Inc., 492 F.Supp. 906, 909 (E.D.Mich.1980) (“[I]t is difficult to determine the relationship of ERISA to each of these factors.”).
Even though the five factors provide little guidance, almost every circuit, including this one, subsequently adopted the test for determining whether district courts should, in their discretion, award attorney fees to a prevailing plaintiff in an ERISA suit. See Lawrence v. Westerhaus, 749 F.2d 494, 495-96 (8th Cir.1984); Berlind, 71 Cornell L.Rev. at 1042 (noting that “[njearly all circuits have adopted the five-factor test or a similar approach.”).
The ERISA fee-shifting provision is like the fee provisions in the civil rights statutes. See 42 U.S.C. § 1988 (§§ 1981, 1983 actions); 42 U.S.C. § 2000a-3(b) (Title II actions); 42 U.S.C. § 2000e-5(k) (Title VII actions). The Supreme Court first articulated a presumption in favor of awarding fees under those statutes in Newman v. Piggie Park Enter., Inc., 390 U.S. 400, 88 S.Ct. 964, 19 L.Ed.2d 1263 (1968), a Title II case. The Supreme Court held that prevailing plaintiffs “should ordinarily recover an attorney’s fee unless special cir*678cumstances would render such an award unjust.” Id. at 402, 88 S.Ct. 964. This Newman presumption (sometimes referred to as the Hensley standard, see Hensley v. Eckerhart, 461 U.S. 424, 429, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983) (applying the presumption in a case involving § 1988)) has been described as a “less demanding” standard for awarding fees, while the fíve-factor test has been described as “more exacting.” See Eddy v. Colonial Life Ins. Co. of Am., 59 F.3d 201, 203 (D.C.Cir.1995).
This circuit appears to have been the first one to apply the Newman presumption to ERISA cases. See Landro v. Glendenning Motorways, Inc., 625 F.2d 1344, 1356 (8th Cir.1980). The Ninth and Fourth Circuits followed suit. See Smith v. CMTA-IAM Pension Trust, 746 F.2d 587, 589 (9th Cir.1984); Reinking v. Philadelphia Am. Life Ins. Co., 910 F.2d 1210, 1218 (4th Cir.1990). But the Fourth Circuit soon switched positions and rejected the Neuman presumption in ERISA cases, concluding that ERISA is not a remedial statute on the same plane as the civil rights statutes. Quesinberry v. Life Ins. Co. of N. Am., 987 F.2d 1017, 1030 (4th Cir.1993) (en banc) (overruling Reinking to the extent that it adopted a mandatory presumption in favor of granting fees). Most other circuits have rejected the Newman presumption in ERISA cases for the same reason. See Eddy, 59 F.3d at 209-10; Ellison v. Shenango Inc. Pension Bd., 956 F.2d 1268, 1274 (3d Cir.1992); Armistead v. Vemitron Corp., 944 F.2d 1287, 1301-04 (6th Cir.1991); Iron Workers Local No. 272 v. Bowen, 624 F.2d 1255, 1265-66 (5th Cir.1980).
We continue to apply both the “less demanding” Neuman presumption in ERISA cases, as well as the “more exacting” five-factor test. See, e.g., Lutheran Med. Ctr. of Omaha v. Contractors, Laborers, Teamsters & Eng’rs Health & Welfare Plan, 25 F.3d 616, 623-24 (8th Cir.1994) (referring to both the five-factor test as well as the “special circumstances” presumption); Stanton v. Larry Fowler Trucking, Inc., 52 F.3d 723, 729 (8th Cir.1995) (same); Welsh v. Burlington Northern, Inc., Employee Benefits Plan, 54 F.3d 1331, 1342 (8th Cir.1995) (same). But curiously, we have never questioned the compatibility of the two tests, even though it has been suggested that the tests are decidedly incompatible:
If the jurisdiction has [adopted the Newman presumption but] also adopted the Eaves test, the five factors are reduced to mere formalities recited to justify an almost automatic award for every prevailing plaintiff. In McConnell v. MEBA Medical & Benefits Plan, [759 F.2d 1401, 1406 (9th Cir.), opinion superseded by, 778 F.2d 521 (9th Cir.1985)] the Ninth Circuit recognized this phenomenon, stating that ‘proper consideration of the five factors will invariably lead to the conclusion that a prevailing plan participant or beneficiary should recover attorneys’ fees.’ The court held that the district court abused its discretion in denying the plaintiffs request for fees, because ‘no special circumstances existed warranting the denial.’ Thus, the court held the district court’s balancing of the Eaves factors in favor of the defendant irrelevant absent unusual circumstances demonstrating an improper award.
This statement assumes that the courts seriously apply the Neuman presumption. It is possible that the Eaves test can overcome the Newman presumption by considering any of the five factors that mitigate against the plaintiff as special circumstances rendering an award unjust. Thus, if the district court bal-*679anees the Eaves factors and determines that an award is unwarranted, it can deny the request using the machinery of the presumption. However, this approach would practically nullify the Newman presumption, just as a serious application of the presumption reduces the vitality of the five-factor analysis.
Berlind, 71 Cornell L.Rev. at 1044 & n. 56 (internal citations omitted).
We have not had to address the apparent incompatibility that exists between the tests because we have mostly reviewed decisions awarding fees that have been supported both by the presumption and the five factors. On one occasion, however, we upheld a denial of attorney fees because the defendant had shown special circumstances sufficient to overcome the presumption. Hechenberger v. W. Elec. Co. Inc., 786 F.2d 347, 348-49 (8th Cir.1986) (upholding the denial of fees where plaintiffs continued to pursue an appeal even though their action had been mooted by an amendment of a Missouri statute that abolished the practice they challenged, and the ERISA plan abandoned the challenged practice).
The district court denied the Martins’ fee request in reliance on the five-factor test, but in the absence of any special circumstances that would overcome the presumption in favor of awarding fees. Thus, this appears to be the first time that the two tests butt up against one another. Adding to the confusion is the fact that we have referred to the defendant’s burden of overcoming the presumption both as one of persuasion, see Stanton, 52 F.3d at 729, and as one of production, see Gunderson v. W.R. Grace & Co. Long Term Disability Income Plan, 874 F.2d 496, 500 (8th Cir.1989). The district court denied the Martins’ fee request despite the Plan’s failure to produce any evidence of special circumstances, perhaps persuaded solely by the Plan’s arguments that the five-factor test weighed in its favor.
Faced with this quandary, we are nevertheless unable, as a panel, to disregard either Landro or Lawrence without review by the en banc court. Under these circumstances, I agree with the majority’s decision to hold, as the Ninth Circuit did, that a district court abuses its discretion when it denies fees in the absence of special circumstances. See McConnell v. MEBA Med. & Benefits Plan, 778 F.2d 521, 525 (9th Cir.1985).