ComplianceOctober 22, 2010

Cash Balance Plaintiff to get Attorney’s Fees

A federal judge in Illinois ruled that a participant in the Verizon Communications cash balance plan is entitled to attorney’s fees for her long-running legal battle even though she lost in her primary claim.

Reported by Fred Schneyer

U.S. Magistrate Judge Morton Denlow of the U.S. District Court for the Northern District of Illinois decided that granting Cynthia Young lawyer fees was appropriate even though she did not win her claim that the plan should not be allowed to escape liability by merely correcting a plan document drafting error (see Verizon Allowed to Fix Plan Drafting Mistake).

In his ruling, Denlow said he relied on a U.S. Supreme Court decision earlier this year in which the high court held that an Employee Retirement Income Security Act (ERISA) litigant is eligible for attorneys’ fees under ERISA Section 502(g)(1) if the litigant has achieved “some degree of success on the merits (of their claim)” (see U.S. High Court Sets New ERISA Attorneys’ Fees Standard).

Young was able to meet that requirement, Denlow ruled, because in a previous ruling in the case, he had found Verizon’s administrative committee had abused its discretion when it disregarded the drafting error. Young’s victory on the issue, even though she did not receive a monetary award, represented more than a “trivial success on the merits” or a “purely procedural victory,” the court said.

The disputed plan language, which Verizon insisted was an innocent mistake, directed that participants’ benefits were to be calculated by using a “transition factor” twice instead of once.

Fees were also appropriate, Denlow contended, because they would discourage administrators from making similar careless plan document drafting errors.

“[A]n award of attorney’s fees against Defendants would serve to deter similarly situated plan administrators from making drafting errors through “profound” negligence,” Denlow wrote. “ It is not too much to expect that Verizon would have had a second set of eyes proofread the crucial provisions of the Plan. Perhaps a fee award would encourage Verizon and other plan sponsors and administrators to put in place better drafting practices for the future. A fee award would also send the message that a plan administrator may not flout ERISA’s “plan documents” rule simply because of its own mistake.”

The latest ruling is here.