Court Opinion

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Opinions of the United
2007 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

11-26-2007

Tomasko v. Ira H Weinstock PC
Precedential or Non-Precedential: Non-Precedential

Docket No. 06-4343

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                                                             NOT PRECEDENTIAL

                     UNITED STATES COURT OF APPEALS
                          FOR THE THIRD CIRCUIT
                               ____________

                              Nos. 06-4343 & 06-4440
                                   ____________

                             RONALD T. TOMASKO,

                                     Appellant/Cross Appellee,

                                          v.

IRA H. WEINSTOCK, P.C.; IRA H. WEINSTOCK, as Trustee of the Ira H. Weinstock,
P.C. Money Purchase Pension Plan and Ira H. Weinstock, P.C. Profit Sharing Plan; IRA
  H. WEINSTOCK, P.C., as Plan Administrator of the Ira H. Weinstock, P.C. Money
     Purchase Pension Plan and Ira H. Weinstock, P.C. Profit Sharing Plan; IRA H.
                             WEINSTOCK, individually,

                                    Appellees/Cross Appellants.

                                   ____________

                   On Appeal from the United States District Court
                       for the Middle District of Pennsylvania
                            (D.C. Civil No. 98-cv-01978)
                      District Judge: Hon. A. Richard Caputo

                     Submitted Under Third Circuit LAR 34.1(a)
                                September 14, 2007

          Before: RENDELL, FUENTES, and CHAGARES, Circuit Judges.

                                   ____________

                             (Filed November 26, 2007)

                            OPINION OF THE COURT
CHAGARES, Circuit Judge.

       In this long-running benefits dispute, the District Court held that attorney Ira

Weinstock, in his individual and administrative capacities (collectively, Weinstock),

violated ERISA by not making pension contributions on $6,100.00 in compensation to his

former employee (and current competitor) Ronald Tomasko (Tomasko). The parties have

now cross-appealed, for the second time, the District Court’s decision not to award either

party attorney’s fees. Unfortunately, although this case has been ongoing for nearly nine

years, and although this Court has already considered, and remanded on, the issue of

attorney’s fees, we must once again vacate and remand that part of the District Court’s

decision that concerned Tomasko’s fee request. We will affirm the District Court,

however, with respect to Weinstock’s fee request.

                                              I.

       Because we write only for the parties, and because this case has been before us

once already, see Tomasko v. Weinstock, 80 F. App’x 779, 785 (3d Cir. Nov. 17, 2003),

our summary of the facts is brief. Tomasko worked for Weinstock from August 13, 1991

until January 2, 1997, when Tomasko resigned to start a competing law firm. As

Weinstock’s employee, Tomasko participated in two defined contribution plans governed

by ERISA. Weinstock was the administrator, sponsor, and sole trustee for the plans.

Tomasko’s compensation agreement included provisions for additional compensation

over and above his salary, but Weinstock had discretion to determine how much Tomasko

                                              2
would be paid. On December 15, 1996, Tomasko requested $14,200.00 in additional

compensation and bonuses for work performed for the firm in 1996. On January 17,

2007, Weinstock paid Tomasko $6,100.00, but treated the money as 1997 – not 1996 –

compensation. Because the plans required a participant to be employed by Weinstock on

December 31 to receive a pension contribution for that plan year, Weinstock’s treatment

of the $6,100.00 as 1997 compensation saved him the pension contributions on that

amount because Tomasko resigned before December 31, 1997.

       Tomasko sued, asserting one claim under the Pennsylvania Wage Payment and

Collection Law (WPCL), for non-payment of monies allegedly owed to him, and two

claims under ERISA, for non-payment of pension contributions and for breach of

fiduciary duty. In October 2001, the District Court held a bench trial, and on December

18, 2001 issued its decision. The District Court ruled in favor of Tomasko on parts of

each ERISA claim, and ordered Weinstock to make “appropriate contributions” to

Tomasko’s pension plans for the $6,100.00 that Weinstock had improperly characterized

as 1997 earnings. The District Court ruled in favor of Weinstock on the WPCL claim.

       Both Tomasko and Weinstock then moved for attorney’s fees. The District Court

denied both motions, and both parties appealed.

       On October 17, 2003, this Court affirmed the District Court’s judgments on the

merits, but vacated the denial of attorney’s fees because the District Court had not

analyzed the attorney’s fees motions using the five-factor test articulated by this Court in

                                              3
Ursic v. Bethlehem Mines, 719 F.2d 670 (3d Cir. 1983). Additionally, while the District

Court’s December 18, 2001 decision had determined that Weinstock breached his

fiduciary duty to Tomasko, the District Court’s accompanying Order did not contain any

relief for the breach. Therefore, this Court remanded for the District Court to, first,

consider of the appropriateness of an award of attorney’s fees using the Ursic test; and

second, to clarify what equitable relief (if any) the District Court intended to award for

the denial of benefits or breach of fiduciary duty. See Tomasko v. Weinstock, 80 F.

App’x 779, 785 (3d Cir. Nov. 17, 2003).

       On September 5, 2006, the District Court again denied each party’s motions for

attorney’s fees, but granted Tomasko equitable relief in the form of pre-judgment interest

for Weinstock’s breach of fiduciary duty.

       The parties have now each filed another appeal.

                                             II.

       The District Court had subject matter jurisdiction pursuant to 28 U.S.C. § 1331 and

29 U.S.C. § 1132(e)(1) because this action arose under ERISA. See 28 U.S.C. § 1331;

see also 29 U.S.C. § 1132(e)(1) (granting federal courts exclusive subject matter

jurisdiction over ERISA actions). This Court has appellate jurisdiction pursuant to 28

U.S.C. § 1291 because the District Court’s September 5, 2006 Order, disposing of all the

parties’ claims, was a final order under Rule 54 of the Federal Rules of Civil Procedure.

                                              4
       Section 502(g)(1) of ERISA provides that “[i]n any action under this subchapter . .

. by a participant, beneficiary, or fiduciary, the court in its discretion may allow a

reasonable attorney’s fee and costs of action to either party.” 29 U.S.C. § 1132(g)(1).

Under section 502(g)(1), this Court “review[s] a District Court’s award or denial of

attorney’s fees for abuse of discretion. Our review of the legal standards a District Court

applies in the exercise of its discretion is, however, plenary.” Ellison v. Shenango Inc.

Pension Bd., 956 F.2d 1268, 1273 (3d Cir. 1992) (citing Student Pub. Interest Research

Group v. A.T. & T. Bell Lab., 842 F.2d 1436, 1442 n.3 (3d Cir. 1988)).

                                              III.

       We first address the District Court’s statement of the standard for awarding

attorney’s fees in ERISA actions. Next, we examine the District Court’s application of

three of the Ursic factors regarding Tomasko’s appeal. Finally, we engage Weinstock’s

claims on appeal.

                                              A.

       In its September 5, 2006 opinion, the District Court stated that

       attorney’s fees should not be received in an ERISA suit absent exceptional
       circumstances. With only the first and fifth [Ursic] factors weighing
       slightly in favor of [Tomasko], the Court is not convinced that attorney’s
       fees are warranted. Therefore, after weighing all of the factors set forth by
       the Third Circuit Court of Appeals, the Court finds that an award of
       attorney’s fees is not appropriate in this matter.

Joint Appendix (J.A.) 15.

                                               5
       This is an incorrect statement of the law. Instead, our rule is that “there is no

presumption that a successful plaintiff in an ERISA suit should receive an award [of

attorney’s fees] in the absence of exceptional circumstances.” McPherson v. Employees’

Pension Plan of Am. Re-Ins. Co., Inc., 33 F.3d 253, 254 (3d Cir.1994) (emphasis added).

This is very different from a presumption that prevailing plaintiffs are not entitled to

attorney’s fees “absent exceptional circumstances.” J.A. 15 (emphasis added). In fact,

“the defendant in an ERISA action usually bears the burden of attorney’s fees for the

prevailing plaintiff or plaintiff class, thus ‘encourag[ing] private enforcement of the

statutory substantive rights, whether they be economic or noneconomic, through the

judicial process.’” Brytus v. Spang & Co., 203 F.3d 238, 242 (3d Cir. 2000) (quoting

Report of the Third Circuit Task Force, Court Awarded Attorney Fees 15 (Oct. 8, 1985),

reprinted at 108 F.R.D. 237, 250).1

       The standard for granting attorney’s fees in ERISA cases is a legal standard

subject to plenary review. See Brytus, 203 F.3d at 244 (“whether the District Court

applied the proper standard in making its discretionary determination is a question of law

       1
            The concept of “exceptional circumstances” in the fee award context derives
from the Civil Rights statutes, where a presumption attaches that, absent “special
circumstances,” successful plaintiffs should receive attorney’s fees. See, e.g., Albemarle
Paper Co. v. Moody, 422 U.S. 405, 415 (1975) (Title VII); Newman v. Piggie Park
Enters., 390 U.S. 400, 402 (1968) (Title II). In Ellison, however, we decided against
instituting a similar presumption for prevailing ERISA plaintiffs, because the role of
ERISA plaintiffs is distinguishable from the “private attorneys general” role that plaintiffs
play in the enforcement of the Civil Rights laws. See 956 F.2d at 1274.

                                              6
subject to plenary review”); Ellison, 956 F.2d at 1273; Student Pub. Interest Research

Group, 842 F.2d at1442 n. 3; Rode v. Dellarciprete, 892 F.2d 1177, 1182 (3rd Cir. 1990).

The District Court’s understanding of the standard may well have an impact on its grant

or denial of attorney’s fees. Thus we will vacate the District Court’s denial of Tomasko’s

attorney’s fee motion and remand for application of the proper standard for attorney’s fee

awards in ERISA cases.

                                             B.

       We proceed to the District Court’s application of the Ursic factors to Tomasko’s

attorney’s fee motion to guide the District Court’s analysis on remand.

       Under Ursic, the District Court must consider the following five factors in

deciding whether to grant attorney’s fees in ERISA cases:

               (1) the offending parties’ culpability or bad faith;
       (2) the ability of the offending parties to satisfy an award of attorneys’ fees;
       (3) the deterrent effect of an award of attorneys’ fees against the offending parties;
       (4) the benefit conferred on members of the pension plan as a whole; and
       (5) the relative merits of the parties’ position.

Ursic, 719 F.2d at 673 (citations omitted). A District Court must consider all five Ursic

factors, see Anthuis v. Colt Indus. Operating Corp., 971 F.2d 999, 1011 (3d Cir. 1992),

and its consideration of the factors is reviewed for abuse of discretion, see Ellison, 956
F.2d at 1273. Abuse of discretion occurs “when the judicial action is arbitrary, fanciful or

unreasonable, which is another way of saying that discretion is abused only where no

reasonable man would take the view adopted by the trial court.” Ursic, 719 F.2d at 675.

                                              7
In addition, there is an “abuse, or more accurately a ‘misuse,’ of discretion where the trial

court utilizes improper standards or procedures . . . . In sum, if the District Court has

applied the correct criteria to the facts of the case, then, it is fair to say that we will defer

to its exercise of discretion.” Id. Tomasko argues that the District Court abused its

discretion regarding the first, second, and third Ursic factors.

                                                1.

       The District Court must first consider “the offending parties’ culpability or bad

faith.” Id. at 673. Here, the District Court held that both parties exhibited culpable

conduct. Weinstock was culpable in two ways: he breached his fiduciary duty to

Tomasko out of resentment for Tomasko’s resigning to open a competing law firm; and

Weinstock did not believe that he was treating Tomasko the same as other participants in

the plans. Meanwhile, Tomasko “exhibited culpable conduct by intentionally misleading”

Weinstock regarding Tomasko’s future plans of employment. The District Court

recognized, however, that Tomasko’s “culpable conduct” was “not material to the

[ERISA] claims.” Accordingly, since both parties were culpable, but Tomasko’s

culpability was immaterial, the District Court found the first factor to “weigh slightly in

favor” of Tomasko.

       Tomasko argues that the District Court abused its discretion on the first factor by

not weighing it more heavily in his favor. Tomasko asserts that, given Weinstock’s

culpable conduct, the District Court could conclude that the first factor just slightly

                                                8
favored Tomasko only if it gave weight to what the court described as Tomasko’s

culpable conduct. But, Tomasko argues, culpable conduct that is “immaterial” to an

ERISA violation should not be accorded any weight in a first Ursic factor analysis,

precisely because any such culpability had nothing to do with the ERISA violations at the

heart of the case.

       Tomasko is correct. Other decisions of this Court, when analyzing Ursic’s first

factor, have only considered good or bad faith which had a direct bearing on the

plaintiff’s obtaining, or the defendant’s withholding, of the ERISA benefits at issue. See

McPherson, 33 F.3d at 257-58; Ellison, 956 F.2d at 1275-76; Monkelis v. Mobay Chem.,

827 F.2d 935, 936-37 (3d Cir. 1987); Groves v. Modified Ret. Plan for Hourly Paid

Emps. of Johns Manville Corp and Subsidiaries, 803 F.2d 109, 119 (3d Cir. 1986)

(section 503 claim).

       Here, by contrast, the “culpability” of Tomasko to which the district referred had

to do with Tomasko’s behavior in changing jobs. It had nothing to do with whether

Tomasko earned the disputed compensation in 1996 or 1997. Tomasko did not, for

example, change the dates on his client memos to make them reflect work done in 1996

that was actually done in 1997. It is unreasonable for a fact-finder, charged with

examining culpability regarding an ERISA claim, to describe as “culpable” conduct that

has nothing to do with ERISA liability. Therefore, because Tomasko’s culpability was

irrelevant to the ERISA claims at issue, the District Court abused its discretion by

                                             9
considering what it conceded to be facts “not material to the [ERISA] claims” in its

analysis of Ursic’s first factor. J.A. 12.

                                              2.

       The second Ursic factor requires the District Court to examine “the ability of the

offending parties to satisfy an award of attorneys’ fees.” 719 F.2d at 673. The District

Court decided that because neither Tomasko nor Weinstock appeared to be of limited

means, because both are lawyers working in the same geographical location, and because

the requested fees did not appear too large, “[t]he ability or inability to pay can be

construed in the same manner against either party.” J.A. 13. Importantly, the District

Court also held that both parties could be considered losing parties, as each prevailed on

portions of the claims in the case. The District Court thus concluded that the second

Ursic factor was neutral.

       Tomasko argues that the District Court erred by focusing on both parties’ ability to

pay, not just Weinstock’s. Tomasko claims that, as a prevailing plaintiff, his own ability

to pay is “irrelevant to the court’s inquiry.” Ellison vacated and remanded a District

Court’s denial of attorney’s fees to a prevailing plaintiff. 956 F.2d at 1277. In so doing,

the Court held that it was legal error to apply the ability to pay factor to the prevailing

party. Id. We noted that the prevailing party’s “ability to pay is irrelevant to the court’s

inquiry into the propriety of requiring an offending party to pay a prevailing party’s

attorney’s fees and contradicts the statutory purpose of ERISA to protect pension

                                              10
benefits.” Id. Moreover, since the non-prevailing defendant in Ellison “d[id] not dispute

the sufficiency of the Plan’s assets to cover an award of fees in this case, the District

Court should have resolved the second Ursic factor in favor of an award of fees” to the

plaintiff. Id.

       Here, the District Court was confronted with two separate fee petitions. We

understand that the District Court’s inquiry into Tomasko’s ability to pay arose from its

holding that each party was both “prevailing” and “non-prevailing.” See J.A. 12 (“As

noted above, both parties can be considered a losing party since each prevailed on

portions of the claims.”). When considering Tomasko’s fee petition based on his status as

a prevailing party, however, the District Court was required to consider only the ability of

the offending party to satisfy an award of attorney’s fees. See Ursic, 719 F.2d at 673. In

the context of Tomasko’s fee petition, the “offending party” was Weinstock, and

Tomasko’s “ability to pay” is irrelevant. Rather, the focus should be on whether

Weinstock has the means to pay an award to Tomasko. By contrast, Tomasko’s ability to

pay an award of attorney’s fees becomes relevant only in considering Weinstock’s fee

petition and determining whether to award Weinstock attorney’s fees. Accordingly, the

District Court abused its discretion by not focusing separately on the “offending party” in

each fee petition, and by inquiring into Tomasko’s ability to pay when considering

Tomasko’s fee petition. The second Ursic factor forbids inquiry into the pocket of the

                                              11
prevailing party. See Ellison, 956 F.2d at 1277. For purposes of analyzing whether

Tomasko should be awarded attorney’s fees, the prevailing party was Tomasko.

                                              3.

       Ursic next requires the District Court to analyze “the deterrent effect of an award

of attorneys’ fees against the offending parties.” 719 F.2d at 673. In its opinion, the

District Court did not address Tomasko’s argument that a fee award against Weinstock

would deter Weinstock from future ERISA violations. Instead, the District Court only

discussed (and rejected) Weinstock’s argument that a fee award against Tomasko would

deter Tomasko from filing what Weinstock described as baseless claims. J.A. 13-14.

Accordingly, the District Court held only that the deterrence factor weighed against an

award in favor of Weinstock. The court did not make any determinations regarding an

award in favor of Tomasko.

       In his appeal, Tomasko points out that, in fact, he did argue (in his fee petition

brief) that granting attorney’s fees in his favor would deter Weinstock, and he reproduces

that portion of his fee petition brief argument in his brief to this Court. Tomasko notes

that the District Court’s omission may have resulted from its reference to the wrong

docket number: in its September 5, 2006 Opinion, the District Court cited repeatedly to

Docket No. 117, which was, in fact, Tomasko’s brief in opposition to Weinstock’s fee

award motion. The District Court appears to have ignored Docket No. 107, however,

which was Tomasko’s brief in support of his own fee award motion.

                                             12
       By not considering Tomasko’s arguments on the deterrent value of a fee award in

his favor, the District Court abused its discretion. The District Court acted arbitrarily and

did not utilize proper procedures for considering cross motions when it ignored Tomasko’s

fee award motion and examined only Tomasko’s opposition to Weinstock’s fee award

motion. See Ursic, 719 F.2d at 675 (abuse of discretion occurs “when the judicial action is

arbitrary, fanciful or unreasonable,” or where the trial court “utilizes improper standards or

procedures”).

                                              C.

       Weinstock also appeals the District Court’s denial of his attorney’s fee motion.

This appeal is utterly without merit, because Weinstock merely makes summary

complaints that the District Court did not assign the correct weights to three Ursic factors,

and does not describe how these alleged miscalculations amounted to abuse of discretion.

Because all of Weinstock’s arguments assert mistakes in applying the facts to the Ursic

factors, we review for abuse of discretion. See Brytus, 203 F.3d at 244; Ellison, 956 F.2d

at 1273.

       Weinstock first claims that “[t]he Court erred when it opined that there is evidence

that Weinstock engaged in culpable conduct.” Weinstock Br. at 17. He asserts that if he

had in fact been motivated by bad faith, he would not have paid Tomasko anything, and

the fact that he gave Tomasko the $6,100.00 is evidence of Weinstock’s good faith.

                                              13
       The District Court’s conclusion to the contrary is not an abuse of discretion. The

District Court’s decision – reached after conducting a two-day bench trial – that Weinstock

was at least somewhat culpable, based on his violations of ERISA, is not unreasonable,

and Weinstock gives us no reasoning, beyond one conclusory sentence, why it would be.

       Next, Weinstock argues that the District Court erred when it held that the third

Ursic factor – deterrence – weighed against an award to Weinstock. Because the pension

plan at issue in this case no longer exists, Weinstock argues that there is nothing from

which he can be deterred. But Weinstock misinterprets the District Court’s holding. As

discussed above, the District Court did not rule on Tomasko’s motion for deterrence

against Weinstock – it only ruled on Weinstock’s motion for deterrence against Tomasko.

In any event, simply because Weinstock may no longer be deterred with respect to the

specific plan at issue in this case does not mean that he cannot be deterred from

committing ERISA violations in the event he operates pension plans in the future.

Accordingly, Weinstock’s argument misses the mark, and does not show abuse of

discretion.

       Finally, Weinstock claims that the District Court did not weigh properly the merits

of the parties’ respective positions. The District Court held that this factor weighed

slightly in favor of Tomasko. Because Weinstock prevailed in part, and because Tomasko,

according to Weinstock’s calculation, only received 3.5% of his original damages demand,

Weinstock argues that the District Court should have held that this factor weighed in favor

                                             14
of Weinstock. We must remember, though, that “[o]ne seeking to establish [] an abuse of

discretion . . . assumes a heavy burden,” and “the appellate court may not upset a trial

court’s exercise of discretion on the basis of a visceral disagreement with the lower court’s

decision.” Ursic, 719 F.2d at 675. Weinstock’s argument cannot carry this burden. The

District Court weighed the parties’ relative success, and even if its calculation was

different than our own might be, the scales were square. It thus cannot be said from the

record that the District Court abused its discretion on this point.

       Therefore, the District Court’s treatment of Weinstock’s fee petition will be

affirmed.

                                              IV.

       For the foregoing reasons, we will vacate the District Court’s resolution of

Tomasko’s attorney’s fee petition and remand for consideration in accordance with this

opinion. We will affirm the decision of the District Court with respect to Weinstock’s

attorney’s fee petition.

                                              15