Jeffrey Perelman v. Raymond Perelman , 793 F.3d 368 ( 2015 )

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
Nos. 14-1663 & 14-2742
_____________
JEFFREY E. PERELMAN, AS A PARTICIPANT IN
THE GENERAL REFRACTORIES COMPANY PENSION
PLAN FOR SALARIED EMPLOYEES
v.
RAYMOND G. PERELMAN; RONALD O. PERELMAN;
JASON GUZEK; GENERAL REFRACTORIES
COMPANY; RELIANCE TRUST COMPANY
Jeffrey E. Perelman, as a participant in the General
Refractories Company Pension Plan for Salaried Employees,
a/k/a the Grefco Minerals, Inc. Pension Plan for Salaried
Employees (the Pension Plan),
Appellant
_____________
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. Civil No. 2-10-cv-05622)
District Judge: Honorable John R. Padova
_____________
Submitted Under Third Circuit L.A.R. 34.1(a)
on April 17, 2015
_____________
Before: AMBRO, VANASKIE, and SHWARTZ, Circuit
Judges
(Filed: July 13, 2015)
Paul A. Friedman, Esq.
Epstein, Becker & Green
250 Park Avenue
New York, NY 10177
Jonathan S. Goldman, Esq.
James T. Smith, Esq.
Rebecca D. Ward, Esq.
Blank Rome
130 North 18th Street
One Logan Square
Philadelphia, PA 19103
Counsel for Appellant
Ethan M. Dennis, Esq.
Clark Hill
2005 Market Street
One Commerce Square, Suite 1000
Philadelphia, PA 19103
Clifford E. Haines, Esq.
Haines & Associates
1835 Market Street, Suite 2420
Philadelphia, PA 19103
2
Marjorie M. Obod, Esq.
Dilworth Paxson
1500 Market Street
Suite 3500E
Philadelphia, PA 19102
Counsel for Appellee Raymond G. Perelman
Michael S. Doluisio, Esq.
William T. McEnroe, Esq.
Ryan M. Moore, Esq.
Dechert
2929 Arch Street
18th Floor, Cira Centre
Philadelphia, PA 19104
Andrew J. Levander, Esq.
Dechert
1095 Avenue of the Americas
New York, NY 10036
Counsel for Appellee Ronald O. Perelman
Derek J. Cusack, Esq.
Dicalite Management Group, Inc.
1 Bala Avenue
Suite 310
Bala Cynwyd, PA 19004
Counsel for Appellee General Refractories Company
_____________
OPINION
_____________
3
VANASKIE, Circuit Judge.
This matter arises under § 502(a)(3) of the Employee
Retirement Income Security Act of 1974 (ERISA), 29 U.S.C.
§ 1132(a)(3), which authorizes suits by, inter alia, a pension
plan beneficiary to enjoin any act or practice that violates
ERISA, “to obtain other appropriate equitable relief . . . to
redress such violations,” or to enforce any provision of
ERISA or the terms of a pension plan. Id. Appellant Jeffrey
Perelman is a participant in the defined employee pension
benefit plan (the Plan) of Appellee General Refractories
Company (GRC). Jeffrey alleges that his father, Raymond
Perelman, as trustee of the Plan, breached his fiduciary duties
by covertly investing Plan assets in the corporate bonds of
struggling companies owned and controlled by Jeffrey’s
brother, Appellee Ronald Perelman. Jeffrey contends that
these transactions were not properly reported; depleted Plan
assets; and increased the risk of default, such that his own
defined benefits are in jeopardy. The District Court
dismissed several of Jeffrey’s claims for lack of constitutional
standing, later granted summary judgment against him on all
remaining claims, and denied his application for attorneys’
fees and costs under ERISA § 502(g)(1), 29 U.S.C. §
1132(g)(1). We will affirm.
I.
In 1982, Raymond became the Chairman of GRC, a
large manufacturer of industrial materials.1 Between 2003
1
Our recitation of the factual background of this
appeal is derived primarily from the Second Amended
Complaint.
4
and 2009, Raymond was a trustee of the GRC Plan, and he
served as Plan Administrator between 2003 and 2005. In that
position he exercised discretionary control over management
of Plan assets and thus qualified as both a plan fiduciary and a
“party in interest” under ERISA. See 29 U.S.C. §
1002(21)(A), (14)(A). Jason Guzek, a defendant in this
action but not an appellee, assumed the role of Plan
Administrator from 2006 to 2008 and was succeeded by GRC
itself as Plan Administrator in 2009.
Raymond’s son Ronald has been the controlling
shareholder of Revlon, Inc., and its wholly owned subsidiary,
Revlon Consumer Products Corporation (together, Revlon).
Beginning in 2002, Raymond directed the Plan’s purchase of
roughly $2 million of high-risk Revlon corporate bonds. In
2004, Raymond converted those bonds into Revlon stock. He
and his wife Ruth then assigned beneficial ownership of the
Revlon shares to Mafco Holdings, Inc., another company
owned and controlled by Ronald. As Plan trustee, Raymond
also invested Plan assets in a lending agreement between
Revlon and MacAndrews & Forbes Holdings, Inc.
(MacAndrews), an entity that, like Revlon, was principally
owned by Ronald. One consequence of these transactions
was that Ronald, by virtue of his control over the voting
rights of stock held by the Plan, became a Plan fiduciary
under § 1002(21)(A). Ronald also qualified as a “party in
interest,” both because of that fiduciary status and as a
relative of Raymond. Id. § 1002(14)(A), (F).
Since 1985, Jeffrey has been a participant in GRC’s
defined benefit pension plan. Jeffrey alleges that Raymond
and Ronald, at the Plan’s expense, structured transactions to
allow Ronald to raise capital for Revlon without sacrificing
his control over the company. Jeffrey contends that these
5
investments, which diminished Plan assets, were routinely
misreported by the defendants on the annual reports that a
plan administrator must file with the Internal Revenue
Service (IRS) and Department of Labor. See id. §§ 1023–24.
Between 2003 and 2005, the reports did not disclose that the
Plan held investments in Revlon bonds. Instead, the 2003 and
2004 reports stated that all Plan assets were invested in
master trust accounts, while the reports from 2005 through
2009 stated that all Plan assets were invested in mutual funds.
Assessments from independent auditors, which were
appended to the annual reports between 2003 and 2008, did
disclose the investments in Revlon bonds, but either failed to
identify those investments as party-in-interest transactions or
did so for the wrong reasons. The Plan’s investment in the
lending agreement between Revlon and MacAndrews also
was described inaccurately.
In October 2010, Jeffrey brought this lawsuit both as
an individual and on behalf of the Plan against Raymond,
Ronald, Guzek, and GRC. The Second Amended Complaint,
filed on July 21, 2011, asserts the following: breach of
fiduciary duty of care under 29 U.S.C. § 1104(a)(1)(B)
against Raymond and Ronald (counts One and Ten,
respectively); prohibited party-in-interest transactions under §
1106 against Raymond and Ronald (counts Two and Nine);
failure to diversify plan assets under § 1104(a)(1)(C) against
Raymond, Guzek, and GRC (counts Three and Six); failure to
update or maintain proper plan documents under §§ 1024–27
against Raymond, Guzek, and GRC (counts Four and Seven);
improper delegation of control of plan assets under §
1104(a)(1) against Raymond (count Five); and failure to
prosecute a co-fiduciary’s breach of fiduciary duty against
Guzek, GRC, and Ronald (counts Eight and Eleven). The
6
Complaint seeks monetary relief under ERISA § 502(a)(3),
29 U.S.C. § 1132(a)(3), in the form of restitution for Plan
losses and disgorgement of profits. It also demands
injunctive relief, including removal of Raymond as trustee;
appointment of an independent trustee; an outside audit for all
Plan years from 2002 to 2010; an order enjoining Raymond
from ever again serving in a fiduciary capacity for an ERISA
plan; and an order declaring void any provision in the Plan or
its Trust Agreement that would indemnify any defendant.
Finally, the Complaint requests attorneys’ fees and costs
under ERISA § 502(g)(1), 29 U.S.C. § 1132(g)(1).
In August 2012, the District Court found that Jeffrey
lacked constitutional standing to pursue restitution and
disgorgement claims because he had failed to demonstrate an
actual injury to himself, as opposed to the Plan. The Court
nonetheless permitted Jeffrey to pursue the other requested
forms of injunctive relief. Thereafter, in September 2012,
Raymond executed a corporate resolution terminating himself
as trustee and appointing Reliance Trust Company to that
position.2 GRC also retained the services of an independent
investment manager for the Plan. And earlier in 2012,
Raymond voluntarily contributed $270,446.42 to the Plan’s
trust. None of these actions, however, included an admission
of culpability or wrongdoing.
2
The District Court later granted Jeffrey’s motion to
add Reliance Trust Company as a defendant, but Jeffrey
eventually stipulated to the dismissal of both Reliance and
Guzek, neither of whom are parties to this appeal.
7
In January 2013, the Court denied Jeffrey’s motion to
file a Third Amended Complaint, finding that the addition of
a claim for monetary damages under ERISA § 502(a)(2), 29
U.S.C. § 1132(a)(2), would be futile, again for failure to
allege an actual injury. The Court also denied as moot
Jeffrey’s bid to remove Raymond as trustee. With respect to
the trustee indemnification language, the Court concluded
that the Plan’s clause fell within a safe-harbor provision
because any indemnification would be funded by GRC rather
than by the Plan itself. Because the Trust Agreement,
however, was ambiguous as to which entity would fund any
indemnification, the Court concluded that Jeffrey had stated a
claim for relief as to that document. The Court dismissed
Jeffrey’s claim to permanently bar Raymond from serving as
an ERISA fiduciary, finding that the Secretary of Labor,
rather than Jeffrey, was the appropriate party to seek such
relief with respect to pension plans in which Jeffrey was not a
participant or beneficiary. And finally, the Court concluded
that Jeffrey’s request for a historical audit would serve only to
support an attendant claim for restitution and disgorgement,
which the Court had already concluded was impermissible in
the absence of actual injury sustained by Jeffrey. The Court
thus limited the scope of Jeffrey’s demand for an audit to a
determination of whether the Plan was currently at risk of
default.
In February 2014, the Court granted summary
judgment in favor of the defendants on all remaining claims.
First, the Court concluded that, under statutorily endorsed
accounting principles, no genuine dispute of material fact
existed as to whether the Plan was currently funded, meaning
that Jeffrey was not entitled to audit relief. The Court also
8
concluded that no live case or controversy existed with
respect to the Trust Agreement’s indemnification clause.
On April 14, 2014, the District Court denied Jeffrey’s
application for attorneys’ fees and costs, finding that Jeffrey
had not achieved “some degree of success on the merits,”
Ruckelshaus v. Sierra Club, 463 U.S. 680, 694 (1983), and
that even if some degree of success had been achieved,
Jeffrey had not demonstrated an entitlement to fees under the
five-factor test announced in Ursic v. Bethlehem Mines, 719
F.2d 670, 673 (3d Cir. 1983). He filed a timely appeal.
II.
The District Court had jurisdiction under 29 U.S.C. §
1132(e) and (f). We have appellate jurisdiction under 28
U.S.C. § 1291.
Jeffrey raises two main claims on appeal. First, he
contends that he has standing to seek monetary equitable
relief such as disgorgement or restitution under ERISA §
502(a)(3) because (1) he did in fact suffer an increased risk of
Plan default with respect to his defined benefits, and (2)
insofar as he seeks relief on behalf of the Plan, no showing of
individual harm is necessary. Second, Jeffrey challenges the
denial of attorneys’ fees and costs, contending that (1) his
lawsuit was a catalyst for the voluntary resolution of several
issues, including Raymond’s resignation as Trustee, and (2)
the District Court misapplied the five Ursic factors.
A.
The burden of establishing standing lies with the
plaintiff. Berg v. Obama, 586 F.3d 234, 238 (3d Cir. 2009).
9
We exercise de novo review over a district court’s legal
conclusions related to standing and review the factual
elements underlying that determination for clear error.
Edmonson v. Lincoln Nat’l Life Ins. Co., 725 F.3d 406, 414
(3d Cir. 2013).
The three well-established elements of the doctrine of
constitutional standing are as follows:
First, the plaintiff must suffer an
injury-in-fact that is concrete and
particularized and actual or
imminent, as opposed to
conjectural or hypothetical.
[Lujan v. Defenders of Wildlife,
504 U.S. 555, 560 (1992).]
Second, “there must be a causal
connection between the injury and
the conduct complained of—the
injury has to be ‘fairly . . .
trace[able] to the challenged
action of the defendant, and not . .
. th[e] result [of] the independent
action of some third party not
before the court.’” Id. (alterations
in original) (quoting Simon v. E.
Ky. Welfare Rights Org., 426 U.S.
26, 41–42 (1976)). “Third, it
must be likely, as opposed to
merely speculative, that the injury
will be redressed by a favorable
decision.” Id. (quotation marks
omitted).
10
Id. at 415.
Over the past fifteen years we have twice grappled
with the complexities of constitutional standing as it relates to
claims for monetary equitable relief brought by plan
participants under ERISA § 502(a)(3). See id. at 414–19;
Horvath v. Keystone Health Plan E., Inc., 333 F.3d 450, 455–
57 (3d Cir. 2003).3 Jeffrey’s standing here, like that of the
plaintiffs in Edmonson and Horvath, turns primarily on the
first element—“injury-in-fact,” also described as “actual
harm.” See Horvath, 333 F.3d at 456. With respect to claims
for injunctive relief, such injury may exist simply by virtue of
the defendant’s violation of an ERISA statutory duty, such as
failure to comply with disclosure requirements. See id.Claims demanding a monetary equitable remedy, by contrast,
require the plaintiff to allege an individualized financial harm
traceable to the defendant’s alleged ERISA violations. Id. at
457.4
3
The parties do not dispute that Jeffrey, as a Plan
participant and beneficiary, has statutory standing to bring a
claim under ERISA § 502(a)(3).
4
As we discuss below, our later opinion in Edmonson
clarified that where a plaintiff seeks disgorgement, rather than
“make-whole” relief such as restitution or surcharge, the
financial harm need not necessarily take the form of a
“loss”—it may instead consist of the measure of the
defendant’s unjust profits coupled with the right of the
beneficiary, as opposed to the plan, to those profits. 725 F.3d
at 418.
11
Jeffrey claims two financial injuries that, in his view,
support a finding of standing to pursue “make-whole”
equitable relief in the form of restitution or surcharge. First,
he submits expert testimony that the Plan suffered a net
diminution in assets of approximately $1.3 million as a result
of Raymond’s investment of Plan assets in Revlon debt.5
Second, he offers expert testimony that due to this diminution
in assets, the Plan’s risk of default increased dramatically. He
concedes, however, that to date, he has received all
distributions under the Plan to which he was entitled.
In the case of a defined benefit plan, like the Plan here,
the Supreme Court has established that diminution in plan
assets, without more, is insufficient to establish actual injury
to any particular participant. See Hughes Aircraft Co. v.
Jacobson, 525 U.S. 432, 439–41 (1999). This stems from the
fact that participants in such a plan are entitled only to a fixed
periodic payment, and have no “claim to any particular asset
that composes a part of the plan’s general asset pool.” Id. at
440. Accordingly, even if the defendants’ dealings resulted in
a diminution in Plan assets, they are insufficient to confer
standing upon Jeffrey absent a showing of individualized
harm.
By contrast, there is some support for the notion that a
participant or beneficiary in a defined benefit plan has
suffered an injury sufficient to pursue a claim for “make-
whole” equitable monetary relief under § 502(a) where the
fiduciary’s alleged misconduct “creates or enhances the risk
5
This sum accounts for Raymond’s voluntary payment
of $270,446 into the Plan’s trust in 2012.
12
of default by the entire plan.” LaRue v. DeWolff, Boberg &
Assocs., Inc., 552 U.S. 248, 255 (2008). The risk of default
by defined benefit plans, of course, is not a novel or abstract
concept. Congress has sought rigorously to minimize or
eliminate such risk by requiring defined benefit plans “to
satisfy complex minimum funding requirements, and to make
premium payments to the Pension Benefit Guaranty
Corporation for plan termination insurance.” Id.Specifically, an employer must make “minimum
required contribution[s]” to its defined benefit plan whenever
“the value of plan assets” is less than the plan’s yearly
“funding target,” defined as “the present value of all benefits
accrued or earned under the plan as of the beginning of the
plan year.” 26 U.S.C. § 430(a)(1), (d)(1); 29 U.S.C. §
1083(a)(1), (d)(1). In other words, an employer is required to
contribute to a plan whenever the plan’s liabilities exceed its
assets. However, a plan does not qualify as “at-risk” or
“underfunded”—statuses which trigger even more onerous
funding safeguards—unless the value of plan assets is less
than 80% of the plan’s funding target. 26 U.S.C. § 430(i)(4),
(f)(3)(C); 29 U.S.C. § 1083(i)(4), (f)(3)(C).
Under the same statutory scheme, plan surpluses or
shortfalls are calculated based on prevailing “segment rates,”
i.e., interest rates based on historical bond yields. See 26
U.S.C. § 430(h)(2); 29 U.S.C. § 1083(h)(2). On July 6, 2012,
Congress enacted the Moving Ahead for Progress in the 21st
Century Act (MAP-21), Pub. L. No. 112-141, § 40211, 126
Stat. 405, 846–50 (2012), which authorized the use of new
segment rates beginning December 31, 2011. See 26 U.S.C. §
430(h)(2)(C)(iv); 29 U.S.C. § 1083(h)(2)(C)(iv). That
authorization was extended in August 2014 and remains
operative. See Highway and Transportation Funding Act of
13
2014 (HAFTA), Pub. L. No. 113–159, § 2003, 128 Stat.
1839, 1849–51 (2014). As explained in HAFTA’s legislative
history, “MAP–21 modified the interest rates used in valuing
pension liabilities to give employers the option to effectively
spread out the higher contributions over a longer period of
time than would otherwise have been required.” H.R. Rep.
No. 113-520, pt. 1, at 19 (2014).
As of January 1, 2013, the date of the Plan’s most
recent available actuarial report, the Plan had assets of
approximately $13.6 million. Jeffrey concedes that, under
MAP-21 accounting methods, the Plan’s liabilities at that
time were approximately $13.0 million, meaning that the
Plan’s assets exceeded its liabilities. By the same token,
however, we accept his allegations (which are bolstered by
his expert) that, under the statutory valuation methods
predating MAP-21, the Plan’s liabilities on an ongoing plan
basis were approximately $16 million—a ratio that left the
Plan only 85% funded. In Jeffrey’s view, the fact that the
Plan’s assets were less than its liabilities under at least one
analytical approach would permit a factual finding that
Raymond’s dealings increased the risk that the Plan might
default on its obligations. Jeffrey argues that the dueling
legitimacy of the two accounting approaches is a question of
fact that must be resolved at trial.
We agree with the District Court, however, that the
controlling yardstick here is provided by the finely tuned
framework established by Congress. Where a plan’s assets
exceed its liabilities under a statutorily accepted accounting
method, it passes muster as a matter of law, i.e., the employer
need not make additional contributions to remove a
designation of “at-risk” or “underfunded” status. See, e.g.,
Harley v. Minn. Min. & Mfg. Co., 284 F.3d 901, 908 (8th Cir.
14
2002) (finding no injury where plan funding level had not
triggered minimum required contributions); Adedipe v. U.S.
Bank, Nat’l Ass’n, 62 F. Supp. 3d 879, 894–95 (D. Minn.
2014) (concluding that the “relevant measure” for actual
injury is whether the plan’s funding levels triggered minimum
required contributions).
Here, the evidence is undisputed that as of January 1,
2013, under a valuation method approved by Congress, the
Plan was appropriately funded, and GRC had no obligation to
make further contributions to stabilize the Plan’s finances.
Under the circumstances, Jeffrey’s allegation that the Plan is
nonetheless at risk of default is entirely speculative. See
David v. Alphin, 704 F.3d 327, 338 (4th Cir. 2013) (“[T]he
risk that Appellants’ pension benefits will at some point in the
future be adversely affected as a result of the present alleged
ERISA violations is too speculative to give rise to Article III
standing.”); Harley, 284 F.3d at 906–07 (noting that because
of minimum contribution requirements, diminutions in plan
surplus generally do not result in actual harm to
beneficiaries). Thus, like the District Court, we conclude that
the SAC fails to allege the actual harm required to sustain
constitutional standing for an individual claim of “make-
whole” equitable relief under § 502(a)(3).
Jeffrey also claims that he has standing to seek
disgorgement of profits under Edmonson, where we
recognized that “an ERISA beneficiary suffers an injury-in-
fact sufficient to bring a disgorgement claim when a
defendant allegedly breaches its fiduciary duty, profits from
the breach, and the beneficiary, as opposed to the plan, has an
individual right to the profit.” 725 F.3d at 418. He is correct
that, to pursue such a claim, a plaintiff need not plead a
financial loss. Nonetheless, the plaintiff must still show “an
15
individual right to the defendant’s profit . . . .” Id. at 417.
Jeffrey has failed to do so.
Finally, Jeffrey argues that he need not prove an
individualized injury insofar as he seeks monetary equitable
remedies in a “derivative” or “representative” capacity on
behalf of the Plan.6 Our own case law provides no support
for this theory, and other federal appellate courts have
unanimously rejected it. See Alphin, 704 F.3d at 334–36
(finding no representational standing where plaintiffs suffered
no individualized injuries); McCullough v. AEGON USA Inc.,
585 F.3d 1082, 1086 (8th Cir. 2009) (same); Loren v. Blue
Cross & Blue Shield of Mich., 505 F.3d 598, 608–09 (6th Cir.
2007) (same); Glanton ex rel. ALCOA Prescription Drug
Plan v. AdvancePCS Inc., 465 F.3d 1123, 1125 (9th Cir.
2006) (noting that there is “no . . . tradition of unharmed
ERISA beneficiaries bringing suit on behalf of their plans”);
Harley, 284 F.3d at 906 (“[T]he limits on judicial power
imposed by Article III counsel against permitting participants
or beneficiaries who have suffered no injury in fact from
6
There is no question that representative suits by plan
participants or beneficiaries against fiduciaries for breach of
fiduciary duty are permitted by, and generally brought under,
ERISA § 502(a)(2). See, e.g., Mass. Mut. Life Ins. Co. v.
Russell, 473 U.S. 134, 140 (1985). A handful of courts have
concluded that § 502(a)(3) also authorizes representative suits
seeking equitable recovery on behalf of a plan. See, e.g.,
Banyai v. Mazur, No. 00-civ-9806(SHS), 2007 WL 959066,
at *3 (S.D.N.Y. Mar. 29, 2007). We will not reach that
question because we conclude that Jeffrey lacks standing in
any event.
16
suing to enforce ERISA fiduciary duties on behalf of the
Plan.”) (emphasis omitted). Jeffrey provides no authority or
other convincing reason for us to break from the reasoned
consensus of our sister circuits.7 Accordingly, we conclude
that Jeffrey lacks standing to sue under § 502(a)(3) even in a
purely representative capacity insofar as he seeks monetary
equitable relief. In sum, we will affirm the District Court’s
dismissal of all counts in the Second Amended Complaint
insofar as Jeffrey seeks monetary equitable relief.8
7
Jeffrey suggests that if plan participants and
beneficiaries lack standing to bring representative claims for
monetary equitable relief, misconduct by plan fiduciaries will
go unpunished. The Secretary of Labor, however, has
standing to seek appropriate relief for fiduciary misconduct
under § 502(a)(2).
8
As noted earlier, Jeffrey also appeals from the
District Court’s denial of his motion to file a Third Amended
Complaint, which differed from his preceding drafts
principally in that it sought monetary relief under ERISA §
502(a)(2). That provision allows plan beneficiaries to bring a
derivative suit seeking relief from plan fiduciaries for breach
of fiduciary duty under ERISA § 509, 29 U.S.C. § 1109. See,
e.g., In re Schering Plough Corp. ERISA Litig., 589 F.3d 585,
594–95 (3d Cir. 2009). We agree with the District Court that
Jeffrey’s failure to allege actual injury leaves him without
standing to bring suit for monetary damages under §
502(a)(2), just as it bars his existing claims under § 502(a)(3).
Accordingly, because Jeffrey’s proposed amendment would
be futile, we will affirm the District Court’s denial of leave to
amend.
17
B.
Jeffrey’s remaining challenge is to the District Court’s
denial of attorneys’ fees and costs. Our review of a district
court’s denial of an award of attorneys’ fees is for abuse of
discretion, but we review the applicable legal standards de
novo. McPherson v. Emps.’ Pension Plan of Am. Re-Ins. Co.,
33 F.3d 253, 256 (3d Cir. 1994).
ERISA § 502(g)(1) permits a district court to award “a
reasonable attorney’s fee and costs” even to a losing party,
although only one who has achieved “‘some degree of
success on the merits.’” Hardt v. Reliance Standard Life Ins.
Co., 560 U.S. 242, 244–45 (2010) (quoting Ruckelshaus, 463
U.S. at 694). Surmounting that hurdle requires more than
“‘trivial success on the merits’ or a ‘purely procedural
victory.’” Id. at 255 (quoting Ruckelshaus, 463 U.S. at 688
n.9) (alteration omitted). Instead, the court must be able to
resolve the question “without conducting a ‘lengthy inquir[y]
into the question whether a particular party’s success was
Jeffrey also purports to appeal from all of the District
Court’s many legal rulings contained within its orders of
August 28, 2012, January 24, 2013, February 18, 2014, and
April 14, 2014, including rulings addressing his claims for
injunctive relief. Nonetheless, he makes no tailored argument
that the District Court’s dismissal or grant of summary
judgment on those claims was inappropriate in any particular
respect. We will therefore affirm the District Court’s
rejection of all remaining claims for equitable relief.
18
‘substantial’ or occurred on a ‘central issue.’” Id. (alteration
in original).
Here, Jeffrey relies on what we have called the
“catalyst theory” to establish that he has achieved some
degree of success on the merits. Under that theory, a plaintiff
may satisfy the Ruckelshaus standard if, despite failing to
obtain a judgment or even a single ruling in his favor, his
“litigation activity pressured a defendant to settle or render to
a plaintiff the requested relief.” Templin v. Independence
Blue Cross, 785 F.3d 861, 866 (3d Cir. 2015) (emphasis
omitted).
The District Court determined that Jeffrey had not
achieved a level of substantive success sufficient to support
an award of fees under ERISA § 502(g)(1). We conclude
otherwise. The record reflects that, after the filing of
Jeffrey’s lawsuit, Raymond stepped down as Plan trustee; an
independent trustee was appointed; some Plan losses were
reimbursed; Plan records were amended to reflect party-in-
interest transactions; and trustee-indemnification provisions
were modified or removed. Raymond’s counsel conceded
that these actions, which for the most part numbered among
the demands for relief stated in the Complaint, “were done in
an effort to get rid of this case.” App. 902. The concessions
were not merely procedural, and instead had a definite impact
on Raymond’s degree of control over Plan assets and on the
likelihood of accurate reporting of transactions involving Plan
assets in the future. Although such victories were non-
monetary, that renders them no less substantive.
Even where the party has achieved success on the
merits, however, the district court nonetheless retains
19
discretion as to whether to award fees in light of the familiar
Ursic factors, which include:
(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[s].
719 F.2d at 673. The District Court considered the Ursic
factors in the alternative, and found that although the second
and third factors—ability to pay and deterrent effect—
weighed in Jeffrey’s favor, the first, fourth, and fifth
factors—culpability, benefit conferred on Plan members other
than Jeffrey, and the relative merits of the parties’ positions—
weighed against an award of fees. On the whole, the Court
found that an award of fees was not appropriate.
We conclude that the District Court did not abuse its
discretion by declining to award fees. First, the culpability of
the defendants remains speculative. Second, the benefit of
Jeffrey’s lawsuit to other Plan participants has been of a
limited and non-monetary nature—the Plan itself remains
20
fully funded under federal benchmarks. And third, for the
reasons already stated at great length both here and in the
District Court, Jeffrey’s legal efforts to date, which have
involved several years of litigation and four iterations of the
complaint, were predicated in large part upon a flawed theory
of constitutional standing. Under the circumstances, we
conclude that the District Court did not abuse its discretion in
declining to compel the defendants to finance Jeffrey’s
lawsuit. Accordingly, we will affirm the District Court’s
denial of attorneys’ fees and costs to Jeffrey under ERISA §
502(g)(1).
III.
For the foregoing reasons, we will affirm the District
Court’s orders of August 28, 2012; January 24, 2013;
February 18, 2014; and April 14, 2014.
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