Shirley Temme v. Bemis Company, Incorporated , 762 F.3d 544 ( 2014 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 14-1085
SHIRLEY TEMME, et al.,
Plaintiffs-Appellees,
v.
BEMIS COMPANY, INCORPORATED,
Defendant-Appellant.
____________________
Appeal from the United States District Court for the
Eastern District of Wisconsin.
No. 08-cv-0090 — Patricia J. Gorence, Magistrate Judge.
____________________
SUBMITTED JUNE 25, 2014 * — DECIDED AUGUST 6, 2014
____________________
Before KANNE and WILLIAMS, Circuit Judges, and
SPRINGMANN, District Judge ∗∗
* This successive appeal was submitted to the original panel under Sev-
enth Circuit Operating Procedure 6(b). After examining the briefs and
the record, we have concluded that oral argument is unnecessary. Thus,
the appeal is submitted on the briefs and record. See FED. R. APP. P.
34(a)(2)(C).
2 No. 14-1085
PER CURIAM. This appeal from an award of attorneys’ fees
marks the end of protracted litigation between the parties. In
2008, the plaintiff class sued Bemis Company, Inc., for elimi-
nating certain health-care benefits that they believed they
were owed under a 1985 plant-closing agreement with Be-
mis’s predecessor in interest. We reversed the district court’s
initial grant of summary judgment to the defendants, see
Temme v. Bemis, 622 F.3d 730 (7th Cir. 2010), and remanded.
Just before the case went to trial, the parties settled. The
plaintiffs then sought, and were awarded, attorneys’ fees in
the amount of $403,053.75. Bemis appeals the fee award, ar-
guing that its litigation position was substantially justified.
Concluding that the district court did not abuse its discretion
in awarding these fees, we affirm.
I. BACKGROUND
We will assume familiarity with our prior opinion and
discuss the facts only as they pertain to the fee issue. The
plaintiffs and their employer, Hayssen Manufacturing Com-
pany, were parties to a Plant Closing Agreement that prom-
ised the plaintiffs certain medical benefits upon retirement.
In 1996, Bemis acquired Hayssen and assumed its obliga-
tions under the Agreement. After the acquisition, Bemis
twice reduced the benefits it provided under the Agreement:
once in 2005 (by increasing co-pays and deductibles) and
again in 2007 (by eliminating its prescription drug program).
In response, the plaintiffs sued, alleging that the reductions
in benefits breached the Agreement and thereby violated the
∗∗Of the United States District Court for the Northern District of Indi-
ana, sitting by designation.
No. 14-1085 3
Employee Retirement Income Security Act (ERISA), 29
U.S.C. § 1132, and the Labor-Management Relations Act
(LMRA), 29 U.S.C. § 185(a). Judge Stadtmueller certified
plaintiffs’ class, but ultimately granted summary judgment
to Bemis, reasoning that the Agreement did not give the
plaintiffs a lifetime interest in a certain level of health bene-
fits. About a month after Judge Stadtmueller’s summary
judgment ruling, Bemis eliminated all medical benefits un-
der the Agreement.
The plaintiffs appealed the grant of summary judgment,
and we reversed, concluding that the parties did intend to
provide lifetime medical coverage. Temme, 622 F.3d at 737.
We remanded for consideration of what level of medical
benefits the Agreement mandated and whether Bemis
breached the Agreement in 2005 and 2007. Id. at 739.
On remand, the case was transferred by consent to Mag-
istrate Judge Gorence. The plaintiffs amended their com-
plaint to allege that the complete elimination of benefits in
2009 also violated ERISA and the LMRA. They also sought,
and were granted, a preliminary injunction forcing Bemis to
restore the benefits eliminated in 2009 and provide a basic
Medicare Part D drug benefit, essentially returning the
plaintiffs to the situation they were in before the 2007 bene-
fits reduction. (Before the preliminary injunction, Bemis had
not restored any benefits, even after our ruling that the par-
ties contracted for some level of benefits, and it continued to
insist, despite our opinion, that the Agreement did not obli-
gate them to provide the plaintiffs anything.) In her order
granting the preliminary injunction, the magistrate judge
highlighted the harm likely to befall the plaintiff class (all
octogenarians and older) without the promised benefits. For
4 No. 14-1085
example, the magistrate judge noted that without the
Agreement’s added benefits, the slim Medicare benefits that
the class representative Thomas Temme was limited to left
him nearly broke. Those modest benefits, the court observed,
could not protect him from crippling debt after he suffered a
stroke and his wife attempted to cope with Alzheimer’s and
glaucoma. Thomas Temme has since passed away.
The plaintiffs then moved to bifurcate the pending trial,
asking the magistrate judge to separate the liability phase of
the trial from the damages phase. To that extent, the court
granted the motion. But the magistrate judge also recognized
that the plaintiffs believed that Bemis’s actions in 2007 and
2009 breached the Agreement as a matter of law. Mindful of
our discussion in the case’s first appeal that a finder of fact
needed to determine the level of benefits promised by the
Agreement, the magistrate judge was unwilling to go that
far. She also rebuffed the defendant’s attempt to decertify
the class on the basis of Wal-Mart v. Dukes, 131 S. Ct. 2541
(2011).
On the eve of trial, the parties settled. Their settlement
called for Bemis to pay for any plaintiff to participate in the
Medicare Part D prescription drug benefit and in the Medi-
care supplement plan. The settlement also required Bemis to
reimburse certain out-of-pocket costs incurred between 2007
and 2011 (when the preliminary injunction was issued) by
any plaintiffs who participated in these programs during
that time. The parties failed to resolve, however, whether the
plaintiffs were entitled to attorneys’ fees.
The parties put the issue of attorneys’ fees before the
magistrate judge, and she awarded fees. ERISA allows a
court, in its discretion, to award “a reasonable attorney’s fee
No. 14-1085 5
and costs of action to either party.” 29 U.S.C. § 1132(g)(1).
The magistrate judge applied each of the two tests that, in
different decisions, we have told district judges in ERISA
cases to use when deciding whether to award fees. See Kolbe
& Kolbe Health & Welfare Benefit Plan v. Med. Coll. of Wiscon-
sin, Inc., 657 F.3d 496, 505–06 (7th Cir. 2011) (describing two
tests and observing that they both seek essentially the same
information). Under the first test, the magistrate judge exam-
ined five factors: 1) the degree of the offending parties’ cul-
pability; 2) the degree of the ability of the offending parties
to 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’ po-
sitions. See id. She found that all five factors weighed in fa-
vor of an award of fees. She then turned to the second test,
which evaluates whether the defendant’s position was “sub-
stantially justified.” Id. at 506. Noting that the defendant had
eliminated benefits that, in our words, the plaintiffs were
“clearly entitle[d]” to, Temme, 622 F.3d at 737, the magistrate
judge concluded that the defendant’s position was not sub-
stantially justified.
The magistrate judge then examined the fee petitions to
determine the proper size of an award. She struck billing en-
tries that were vague or for time not reasonably expended on
the case, concluded that the lawyers’ billing rates were rea-
sonable, and calculated the lodestar amount. Finding no rea-
son to alter the lodestar, that amount became the fee award:
$403,053.75, for four years of advocacy, including an appeal
and trial preparation. On appeal, Bemis disputes their liabil-
ity for any fees.
6 No. 14-1085
II. ANALYSIS
We must dispose of several preliminary matters before
proceeding to the merits of this appeal. First, Bemis calls into
question the applicable standard of review. Bemis concedes
that an award of attorneys’ fees generally is reviewed for
abuse of discretion, see, e.g., Kolbe & Kolbe, 657 F.3d at 505,
but argues that a stricter standard should apply in this ap-
peal. It contends that because the magistrate judge presided
over the litigation only after remand from this court, the
judge never developed the kind of familiarity with the issues
that we have cited as reason to apply this deferential stand-
ard of review. We disagree. As we have noted, our standard
of review is deferential for “a number of reasons,” not just
the trial judge’s familiarity with the case, including “the is-
sues tend to be factual matters for which appellate review is
limited; the accuracy of the ultimate decision is not likely to
be enhanced by frequent and detailed appellate review; and
it would be wasteful to engage in a ‘second major litigation’
over attorneys’ fees.” Lock Realty Corp. IX v. U.S. Health, LP,
707 F.3d 764, 773 (7th Cir. 2013). We also reject Bemis’s ar-
gument because, as one of our sister circuits has said, “[w]e
can hardly imagine a more futile and foolhardy endeavor
than struggling to review each district court’s degree of fa-
miliarity with a case to decide how much deference to grant
its findings and conclusions.” Swedish Hosp. Corp. v. Shalala, 1
F.3d 1261, 1272 (D.C. Cir. 1993); see also Uselton v. Commercial
Lovelace Motor Freight, Inc., 9 F.3d 849, 853–54 (10th Cir.
1993). Moreover, district courts generally have more experi-
ence administering fee-award decisions in the first instance.
Thus we will review for an abuse of discretion.
No. 14-1085 7
Bemis next questions whether ERISA, with its fee-
shifting provision, is the proper authority for deciding
whether to award fees; it suggests that this case is properly
conceived of as an LMRA or contract case, so the magistrate
judge was required to conduct a different analysis. Bemis
raises two arguments to support its position, but neither is
persuasive.
First, Bemis argues the terms of the healthcare-benefits
agreement were incorporated into the Plant Closing Agree-
ment by reference to the parties’ separate collective-
bargaining agreement. Bemis believes that under CIGNA
Corp. v. Amara, 131 S. Ct. 1866 (2011), the terms of that agree-
ment were not “terms of the plan,” see ERISA § 502(a)(1)(B),
29 U.S.C. § 1132(a)(1)(B), that the plaintiffs could enforce us-
ing ERISA. This argument fails because we previously de-
termined that the terms of this plan were found only when
reading the collective-bargaining agreement and Plant Clos-
ing Agreement jointly, and therefore both documents must
necessarily be considered. See Temme, 622 F.3d at 736 (inter-
preting the phrase “retired employee medical benefit” by
reading the Closing Agreement and CBA “in conjunction”
with one another). Cf. Orth v. Wisconsin State Employees Un-
ion Council 24, 546 F.3d 868 (7th Cir. 2008) (analyzing ERISA
plan contained in collective bargaining agreement). This is
not the case, like in CIGNA, where the Court refused to read
the summary documents as terms of the plan because they
constituted “information about the plan” and were not,
themselves, “part of the plan.” CIGNA, 131 S. Ct. at 1877
(emphasis in original). Here, our previous decision deter-
mined what was “part of the plan,” and that included both
documents.
8 No. 14-1085
Second, according to Bemis, this case does not involve an
“ERISA plan” because Bemis simply pays for benefits that
the plaintiffs have received through third-party provided
insurance. Again, we disagree. Hayssen (and, as its succes-
sor, Bemis) contracted with the plaintiffs to provide lifetime
welfare benefits in the form of reimbursement for health-
care costs. See Temme, 622 F.3d at 737; see also 29 U.S.C.
§ 1002(1). When parties collectively bargain, as the parties
here did, to an agreement that vests in employees with this
kind of welfare benefit, a breach of the agreement violates
ERISA in addition to the LMRA. See Maurer v. Joy Techs., Inc.,
212 F.3d 907, 914 (6th Cir. 2000); Am. Fed’n of Grain Millers v.
Int’l Multifoods Corp., 116 F.3d 976, 980 (2d Cir. 1997). Ac-
cordingly, ERISA is the proper authority for an award of
fees.
Finally, Bemis argues any award would be excessive be-
cause the plaintiffs’ union, and not the plaintiffs themselves,
financed the litigation. Bemis cites no authority for this posi-
tion, nor have we found any. To the contrary, third-party fi-
nancing of litigation is generally not a bar to an award of at-
torneys’ fees. E.g., Morrison v. Comm’r, 565 F.3d 658, 666 (9th
Cir. 2009); Ed A. Wilson, Inc. v. Gen. Servs. Admin., 126 F.3d
1406, 1409-10 (Fed. Cir. 1997); Am. Council for the Blind of Co-
lo., Inc. v. Romer, 962 F.2d 1501, 1503–04 (10th Cir. 1992)
(judgment vacated on an unrelated ground, 506 U.S. 1075
(1993)); Tidewater Patent Dev. Co. v. Kitchen, 421 F.2d 680,
680–81 (4th Cir. 1970). This result is consistent with the more
general proposition that a wrongdoer should not reap the
windfall of the victim’s industry in having secured an alter-
native source of payment. See Restatement (Second) of Torts
§ 920A(2) (1979). And since the purpose of fee-shifting in the
ERISA context is in part deterrence, we see no reason why
No. 14-1085 9
third-party financing should automatically preclude a fee
award.
Having determined that ERISA provides the appropriate
framework for this appeal, we turn to Bemis’s argument
that, under the standards of ERISA, the award was improp-
er. Fees may be awarded under ERISA to a party who
achieves “some degree of success on the merits.” Hardt v. Re-
liance Standard Life Ins. Co., 560 U.S. 242, 255 (2010). Before
Hardt, as the district court observed, we offered two, related
tests for determining when an award of attorney’s fees is
appropriate under ERISA. One, adopted in some form by all
our sister circuits, provided the district court with five fac-
tors to guide its discretion, the same five factors analyzed by
the district court here. The other test asked simply whether
the position of the party against whom the fees are sought
was “substantially justified.” If so, no fees were awarded.
See Kolbe & Kolbe, 657 F.3d at 505–07; Jackman Fin. Corp. v.
Humana Ins. Co., 641 F.3d 860, 866 (7th Cir. 2011).
As in other cases, we have not been asked to decide
whether Hardt does away with our two tests, see Raybourne v.
Cigna Life Ins. Co. of New York, 700 F.3d 1076, 1089 (7th Cir.
2012), but we do note that no Court of Appeals since Hardt
has abandoned its five-factor test. Two approaches have de-
veloped, however, to incorporate Hardt’s “some degree of
success” principle into the jurisprudential landscape. One
holds that Hardt defines a threshold for eligibility for a fee
award, but that the district court still must consider the five
factors to determine whether an award is appropriate.
See Nat’l Sec. Sys., Inc. v. Iola, 700 F.3d 65, 103–04 (3d Cir.
2012); Plasterers’ Local Union No. 96 Pension Plan v. Pepper, 663
F.3d 210, 223 (4th Cir. 2011). The second approach holds that
10 No. 14-1085
assessing whether a party achieved some degree of success
on the merits of its claim is the only factor a district court
must account for, though a district court may still consider
the other factors, as before. See Donachie v. Liberty Life Assur.
Co. of Boston, 745 F.3d 41, 46 (2d Cir. 2014); In re Interstate
Bakeries Corp., 704 F.3d 528, 537–38 (8th Cir. 2013). But, even
under the second approach, if a district court proceeds to
analyze the five factors, a court of appeals reviews that anal-
ysis for abuse of discretion, just as it would before Hardt.
Donachie, 745 F.3d at 47; Nichols v. Unicare Life and Health Ins.
Co., 739 F.3d 1176, 1184 (8th Cir. 2014). We have affirmed the
use of both tests post-Hardt. See Leimkuehler v. Am. United Life
Ins. Co., 713 F.3d 905, 915 (7th Cir. 2013) (finding no abuse of
discretion in use of “substantially justified” test); Raybourne,
700 F.3d at 1090-91 (finding no abuse of discretion in use of
five factor test). Because the district court analyzed the five
factors and in so doing concluded, as Hardt requires, that the
plaintiffs achieved “some degree of success,” we will review
that analysis for abuse of discretion.
Bemis first contests whether the plaintiffs achieved any
degree of success on the merits, but this argument goes no-
where. The settlement agreement provided the plaintiffs
with benefits commensurate with those they enjoyed before
2007—the very same benefits they argued they were entitled
to as a matter of law when they moved to bifurcate the trial.
Had they won the same after a trial, we would consider
them a “prevailing party.” Cf. T.D. v. LaGrange Sch. Dist. No.
102, 349 F.3d 469, 479 (7th Cir. 2003). Because plaintiffs
sought restoration of benefits to their 1985 level in their
amended complaint, and because plaintiffs did not achieve
that ultimate success, Bemis argues that tilts against award-
ing fees. However, the standard is that fees will be awarded
No. 14-1085 11
to “parties achieving some success, even if not major success.”
Hardt, 560 U.S. at 254 (emphasis in original, quotation omit-
ted). We have no trouble concluding that the plaintiffs
achieved some degree of success on the merits or that the
benefits conferred on the class members (the fourth of the
five-part test) favors the awarding of fees.
Next, Bemis points to the initial grant of summary judg-
ment in its favor to argue that, even if the plaintiffs eventual-
ly achieved some success, Bemis’s litigation position was (at
least initially) substantially justified. And since it was sub-
stantially justified, Bemis concludes, the fee award was im-
proper, or at least excessive. We find this argument unavail-
ing for three reasons.
First, when we review the five-factor test, we consider
the merits of the loser’s position as just one of five factors
(the fifth factor), rather than in isolation. See, e.g., Kolbe &
Kolbe, 657 F.3d at 505-06; Williams v. Metro. Life Ins. Co., 609
F.3d 622, 635–36 (4th Cir. 2010); Martin v. Arkansas Blue Cross
and Blue Shield, 299 F.3d 966, 973 (8th Cir. 2002) (en banc);
Eddy v. Colonial Life Ins. Co. of Am., 59 F.3d 201, 207–10 (D.C.
Cir. 1995). Bemis says nothing significant about the other
four factors, or anything other than its supposedly substan-
tially justified litigation position.
Second, even the “substantially justified” factor (or test, if
we consider it to the exclusion of the other factors) does not
favor Bemis. That test was borrowed from the Equal Access
to Justice Act. See Bittner v. Sadoff & Rudoy Indus., 728 F.2d
820, 828–30 (7th Cir. 1984) (abrograted on an unrelated
ground by McCarter v. Retirement Plan for Dist. Managers of
Am. Family Ins. Grp., 540 F.3d 649 (7th Cir. 2008)). In apply-
ing the test in its original form, courts examine the govern-
12 No. 14-1085
ment’s prelitigation behavior, and Bemis has not addressed
its behavior before the suit started. United States v. Hallmark
Const. Co., 200 F.3d 1076, 1080-81 (7th Cir. 2000).
Finally, just as the Supreme Court has stated that a losing
position may still be substantially justified, a party “could
take a position that is not substantially justified, yet win.”
Pierce v. Underwood, 487 U.S. 552, 569 (1988). Thus, the fact
that Bemis won at some point in the litigation does not mean
its position was “substantially justified.” The relevant “sub-
stantiality” inquiry should be into a party’s posture during
the case as a whole, rather than treating each segment as an
“atomized line-item[].” Comm’r v. Jean, 496 U.S. 154, 161–62
(1990). Here, the district court’s analysis properly took ac-
count of the entire litigation background. In its analysis un-
der both tests, it observed that Bemis ceased providing a
benefit that we ruled the retirees were “clearly entitle[d]” to.
Temme, 622 F.3d at 737 (emphasis added). Moreover, even
after our ruling, Bemis persisted in denying that benefit until
plaintiffs moved for an injunction requiring compliance,
which the district court granted under the threat of con-
tempt. This analysis also points the first of the five factors—
the degree of the defending party’s culpability—towards the
award of fees. (Bemis does not challenge its ability to satisfy
the award, the second factor.)
In further considering the case as a whole, the district
court also noted the desirability of preventing other compa-
nies from cutting off or needlessly delaying benefits in a sim-
ilar manner. In so reasoning, the district court properly
looked at more than a short-lived, provisional victory for
Bemis at one isolated point in this litigation. This tilts the
third of the five factors we consider—the deterrence effect—
No. 14-1085 13
in favor of awarding fees. In all, the five factors weigh to-
wards the grant of attorneys’ fees.
Thus we conclude that the district court did not abuse its
discretion in awarding attorneys’ fees to the plaintiffs. We
reject Bemis’s invitation to cut the amount of the fees award-
ed because, as discussed, Bemis’s position as a whole
throughout the case supported the award of the entire lode-
star amount (minus the subtractions by the lower court dis-
cussed above).
III. CONCLUSION
Accordingly, the award of fees is therefore AFFIRMED.