:: Attorneys’ Fees & Costs Awards In The Fourth Circuit

As we stated in Williams v. Metropolitan Life Insurance Co., a district court in an ERISA action may, in its discretion, award reasonable attorneys’ fees to either party under 29 U.S.C. § 1132(g)(1), if that party has achieved “’some degree of success on the merits.’” ___ F.3d ___, No. 09-1025, 2010 U.S. App. LEXIS 13328, **25-26 (4th Cir. June 30 2010) (quoting Hardt v. Reliance Std. Life Ins. Co., ___ U.S. ___, 130 S.Ct. 2149, 2152, 176 L. Ed. 2d 998 (2010)).

We review a district court’s award of attorneys’ fees to an eligible litigant to determine whether the court has abused its discretion. Williams, ___ F.3d at ___, 2010 U.S. App. LEXIS 13328, *25; Mid Atl. Med. Servs., LLC v. Sereboff, 407 F.3d 212, 221 (4th Cir. 2005). The district court’s factual findings in support of such an award are reviewed for clear error. Williams, ___ F.3d at ___, 2010 U.S. App. LEXIS 13328, *25; Hyatt v. Shalala, 6 F.3d 250, 255 (4th Cir. 1993).

Rinaldi v. CCX, Inc., 2010 U.S. App. LEXIS 14611 (4th Cir. N.C. July 16, 2010)

Rinaldi provides a useful overview of factors considered in whether to award of attorneys’ fees and costs.  The Court begins with a foundation question, “whether Rinaldi achieved ’some degree of success on the merits’ in the district court. ‘”

The Court concludes” [b]ecause the district court found in Rinaldi’s favor and awarded him the severance benefits due under the Employment Agreement, we conclude that Rinaldi was eligible for an award of attorneys’ fees.”

The District Court’s Opinion

Although Rinaldi was eligible for an award of reasonable attorneys’ fees, the district court retained the discretion to decline to award Rinaldi such fees.

The Court observes that,

In Williams, we restated the familiar guidelines that assist a district court’s discretionary determination whether attorneys’ fees should be awarded to an eligible litigant.

The guidelines are as follows:

(1) degree of opposing parties’ culpability or bad faith;

(2) ability of opposing parties to satisfy an award of attorneys’ fees;

(3) whether an award of attorneys’ fees against the opposing parties would deter other persons acting under similar circumstances;

(4) whether the parties requesting attorneys’ fees sought to benefit all participants and beneficiaries of an ERISA plan or to resolve a significant legal question regarding ERISA itself; and

(5)  the relative merits of the parties’ positions.

Williams, ___ F.3d at ___, 2010 U.S. App. LEXIS 13328, **27-28 (quoting Quesinberry v. Life Ins. Co. of N. Am., 987 F.2d 1017, 1029 (4th Cir. 1993) (en banc)).

Although Rinaldi was eligible for an award of reasonable attorneys’ fees, the district court retained the discretion to decline to award Rinaldi such fees. In Williams, we restated the familiar guidelines that assist a district court’s discretionary determination whether attorneys’ fees should be awarded to an eligible litigant. These guidelines include the following five factors: (1) degree of opposing parties’ culpability or bad faith; (2) ability of opposing parties to satisfy an award of attorneys’ fees; (3) whether an award of attorneys’ fees against the opposing parties would deter other persons acting under similar circumstances; (4) whether the parties requesting attorneys’ fees sought to benefit all participants and beneficiaries of an ERISA plan or to resolve a significant legal question regarding ERISA itself; and (5)  [*19] the relative merits of the parties’ positions. Williams, ___ F.3d at ___, 2010 U.S. App. LEXIS 13328, **27-28 (quoting Quesinberry v. Life Ins. Co. of N. Am., 987 F.2d 1017, 1029 (4th Cir. 1993) (en banc)).

Denial Of Attorneys’ Fees Award

The standard is difficult for the challenging party.  Here, the district court’s opinion stood the challenge by the appellant.

. . . we cannot conclude that the district court abused its discretion in declining to award Rinaldi attorneys’ fees. We therefore affirm the district court’s holding denying Rinaldi’s request.

Denial Of Costs

We next address Rinaldi’s argument that the district court erred in denying his request for costs. We agree with Rinaldi that there is a presumption in favor of awarding costs to a prevailing party.

Here we turn to the Federal Rules of Civil Procedure.

Under Rule 54(d)(1) of the Federal Rules of Civil Procedure, costs “should be allowed to the prevailing party” unless a federal statute provides otherwise.

Presumption Indulged

As we stated in Williams, the ERISA statute does not alter this general rule in favor of presumptively awarding fees to the prevailing party, and instead expressly permits a district court to award costs in the court’s discretion. ___ F.3d at ___, 2010 U.S. App. LEXIS 13328, *32 (citing 29 U.S.C. § 1132(g)(1)).

We therefore agree with Rinaldi’s argument that he was entitled to a presumption in favor of costs.

Error Found

The district court bound up its decision on awarding attorneys’ fees with that of awarding costs.  This, absent an articulated grounds, could not stand.

[I]n Teague v. Bakker, . . . we stated that if a district court chooses to depart from the general rule favoring an award of costs to the prevailing party, the court must justify its decision by “articulating some good reason for doing so.” 35 F.3d 978, 996 (4th Cir. 1994) (citations omitted). Because the district court did not state any reason for its decision, we reverse the district court’s holding denying Rinaldi’s request for an award of costs, and remand the case to the district court for reconsideration of Rinaldi’s request in light of the standard that we have discussed here.

And thus,

For these reasons, we reverse the part of the district court’s judgment denying Rinaldi an award of costs, and remand the case to the district court for reconsideration of that issue.

We affirm the balance of the district court’s judgment.

Note: Aside from procedural issues of fees and costs, the case has larger application, namely, application of the “after-acquired evidence rule.”

Upon agreement of the parties, the district court applied a test requiring that CCX prove its claim of after-acquired evidence by establishing the following three elements:

(1) Rinaldi was guilty of some misconduct of which CCX was unaware;

(2) the misconduct constitutes “acts of dishonesty” in connection with CCX’s business, “gross neglect” of his obligations, or “illegal acts;” and

(3) []CCX would have discharged Rinaldi for cause had it known of the misconduct.

More on this point here:

Although we have not previously considered an after-acquired evidence defense in an ERISA case, we have considered this defense in other types of civil cases. In our decisions in those cases, we have applied a three-part test that is essentially the same as the test employed here by the district court. See, e.g., Dotson v. Pfizer, Inc., 558 F.3d 284, 298 (4th Cir. 2009) (involving alleged violations of the Family and Medical Leave Act of 1993, 29 U.S.C. §§ 2601-2654); Miller v. AT&T Corp., 250 F.3d 820, 837 (4th Cir. 2001) (same); Russell v. Microdyne Corp., 65 F.3d 1229, 1240 (4th Cir. 1995) (involving alleged violations of Title VII of the Civil Rights Act of 1964, 42 U.S.C. §§ 2000e-2000e-17).

The three-part test used by the district court also is essentially the same as the Supreme Court’s test for after-acquired evidence set forth in McKennon v. Nashville Banner Publishing Co., 513 U.S. 352, 362-63, 115 S. Ct. 879, 130 L. Ed. 2d 852 (1995), a case arising under  the Age Discrimination in Employment Act of 1967 (ADEA), 29 U.S.C. §§ 621-634.

We have a review of this case on erisaboard.com which addresses this aspect of the decision in more detail.