motion for summary
judgment and will rule without further notice as to the Henkel Plan. In
addition, because it did not comply with local rule 7.1(D) by failing to
file a required document to respond to movant's disputed facts, this
Court also understands that the Henkel Plan admits these facts. Based on
the Henkel Plan's failure to respond to Plaintiff's motion for summary
judgment and its failure to respond to movant's disputed facts, the Court
grants Plaintiff's motion for summary judgment against the Henkel Plan.
C. Attorney's Fees
In his motion for summary judgment, Plaintiff Ehrman seeks an award of
attorney fees. Section 502(g)(1) of ERISA provides that "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). The Seventh Circuit has
applied two tests when considering whether to award attorney fees in ERISA
cases. See Quinn v. Blue Cross & Blue Shield Assoc., 161 F.3d 472, 478
(7th Cir. 1998). The first test assesses the following five factors: (1)
the degree of the offending parties' culpability or bad faith; (2) the
degree of the ability of the offending parties to satisfy personally an
award of attorney's fees; (3) whether or not an award of attorney's 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'
positions. Id.; LaBarge v. Life Insurance Company of North America, No. 00
C 0512, 2001 WL 109527, at *9 (N.D.Ill. 2001). The second test considers
whether the losing party's position was "substantially justified."
Bittner v. Sadoff & Rudoy Industries, 728 F.2d 820, 830 (7th Cir. 1984).
The Seventh Circuit recently reformulated the two tests into one
question: "Was the losing party's position substantially justified and
taken in good faith, or was that party simply out to harass its
opponent?" Quinn, 161 F.3d at 479. Although a modest presumption exists in
favor of awarding attorney fees to the prevailing party in an ERISA case
that decision lies within the Court's discretion.
29 U.S.C. § 1132(g)(1); Bowerman v. Wal-Mart Stores, Inc.,
226 F.3d 574, 592 (7th Cir. 2000).
Here, there is no evidence Defendant acted in bad faith or irrationally
when it terminated Plaintiff's benefits after the 24-month period. Had
Prudential relied on bits and pieces of the medical record to conclude
that Plaintiff was not disabled, the Court would likely have found such
conduct in bad faith. However, Prudential relied upon those portions of
the medical record dealing with Plaintiff's mental state in its
conclusion that his disability was due in part to a mental disorder.
While the Court in its de novo review has reached a different
conclusion, it cannot say that Prudential's position was irrational, in
bad faith, or taken to harass Plaintiff. Accordingly, the Court denies
the award of attorney fees.
D. Prejudgment Interest
Plaintiff also seeks prejudgment interest on the amount of
reimbursement. Prejudgment interest is appropriate in ERISA cases and the
presumption in favor of prejudgment interest, especially in ERISA cases,
is widely recognized. Rivera v. Benefit Trust Life Insurance Co.,
921 F.2d 692, 696-97 (7th Cir. 1991); Lorenzen v. Employees Retirement
Plan of the Sperry and Hutchinson Co., 896 F.2d 228, 236-37 (7th Cir.
Prejudgment interest is viewed as a form of compensatory damage
designed to make the plaintiff whole and place him or her in the same
position as if no violation had occurred. City of Milwaukee v. Cement
Gypsum Co., 515 U.S. 189, 195 (1995); Osterneck v.
Ernst & Whinney, 489 U.S. 169, 175 (1989) (the award of pre-judgment
interest is an element of a plaintiff's complete compensation). The
purpose of prejudgment interest is to compensate the victim and prevent
unjust enrichment. Lorenzen, 896 F.2d at 236-37. Whether to award
prejudgment interest to an ERISA plaintiff is "a question of fairness,
lying within the court's sound discretion, to be answered by balancing
the equities." Trustmark Life Ins. Co. v. University of Chicago Hosps.,
207 F.3d 876, 885 (7th Cir. 2000).
Defendant has failed to present any arguments in response to
Plaintiff's request for prejudgment interest. In considering the award of
attorney fees, the Court concluded that Defendant did not act in bad
faith in disputing Plaintiff's eligibility for benefits. Nevertheless,
the main reason for awarding prejudgment interest is to give a plaintiff
full compensation for the time value of the money that was wrongfully
withheld. That purpose applies in this case. Accordingly, the Court
agrees with Plaintiff that he is entitled to prejudgment interest.
Having determined that Defendant erred by terminating Plaintiff's
payments, the Court now directs Defendant to pay Plaintiff prejudgment
interest on the amount wrongfully withheld beginning from the date when
each payment was due (assuming the payments would have been made
periodically). Interest will be calculated based on the short-term prime
rate, as directed by the Seventh Circuit. National Gypsum Co. v. City of
Milwaukee, 144 F.3d 1111, 1112-13 (7th Cir. 1998); Partington v. Broyhill
Furniture Industries, Inc., 999 F.2d 269, 274 (7th Cir. 1993); Babbitt
v. Zale Enterprises, Inc., No. 99 C 5059, 2001 WL 128157, *1 (N.D.Ill.
Feb. 8, 2001). Furthermore, the interest should be compounded so as to
more closely put Plaintiff in the position he otherwise would have been
in. National Gypsum, 144 F.3d at 1112-1113; Neal v. Honeywell, Inc.,
995 F. Supp. 889, 897 (N.D.Ill. 1998); Babbitt, 2001 WL 128157, *1.
For the reasons set forth above, the Court GRANTS Plaintiff's Motion
For Summary Judgment (#21) as to liability and prejudgment interest. No
attorney fees shall be awarded. The Clerk of the Court is directed to
enter judgment in favor of Plaintiff and against Defendants. This case is
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