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Bender v. Freed

February 2, 2006

GARY L. BENDER AND RENEE BENDER, PLAINTIFFS-APPELLEES,
v.
GRETCHEN M. FREED, DEFENDANT-APPELLEE, AND BERGQUIST COMPANY EMPLOYEE HEALTH PLAN, DEFENDANT, THIRD/PARTY PLAINTIFF-APPELLANT,
v.
PHILLIP TODRYK AND TODRYK LAW OFFICE, THIRD/PARTY DEFENDANTS-APPELLEES.



Appeal from the United States District Court for the Western District of Wisconsin. No. 04 C 10-John C. Shabaz, Judge.

The opinion of the court was delivered by: Sykes, Circuit Judge.

ARGUED JUNE 7, 2005

Before EASTERBROOK, KANNE, and SYKES, Circuit Judges.

The Bergquist Company Health Plan prevailed on an ERISA-based reimbursement claim in the district court and sought attorneys' fees pursuant to ERISA, 29 U.S.C. § 1132(g), and also under 28 U.S.C. § 1927, which permits the district court to award attorneys' fees as a sanction against an attorney who "multiplies the proceedings in any case unreasonably and vexatiously." The district court denied the request for fees, holding that the ERISA fees motion was untimely and the alleged vexatious conduct by counsel predated the present litigation and therefore was not covered by § 1927. We affirm.

I. Background

Plaintiff Gary Bender's health insurance was provided through the Bergquist Company Health Plan ("the Plan"), an employee welfare benefit plan for purposes of ERISA, 29 U.S.C. § 1002(1). In December 2002 Bender was injured when his car collided with a vehicle driven by defendant Gretchen Freed. The Plan paid some $23,000 for Bender's medical expenses related to the accident; under the terms of the plan, it retained a subrogated interest in any damages Bender might later recover.

Believing the accident was Freed's fault, Bender retained an attorney, third-party defendant Phillip Todryk, who presented a claim to Freed's liability insurer. Prior to any litigation, Freed's insurance company settled Bender's claim for its policy limit of $50,000. Bender and Todryk apparently divvied up the money and did not inform the Plan that Freed's insurer had paid a settlement.

In November 2003 Bender and his wife, represented by Attorney Todryk, commenced the present action against Freed and the Plan in Wisconsin state court. The complaint sought additional damages against Freed and a declaration that the Plan was not entitled to reimbursement for the payments it made for Bender's medical treatment. The Plan removed the case to federal court under the auspices of ERISA, counterclaimed for reimbursement of the medical payments, and added Todryk to the case as a third-party defendant on the theory that he was in possession of a portion of the $50,000 already received in the settlement with Freed's insurer.

The Plan moved for summary judgment on its counter-claim for reimbursement and requested attorneys' fees pursuant to 29 U.S.C. § 1132(g), which authorizes the court to award fees, in its discretion, to the prevailing party in an ERISA action. The court granted summary judgment to the Plan on the reimbursement claim but declined to award fees because the Plan "failed to demonstrate why it is entitled to attorneys' fees." The Benders then settled with Freed for $65,000, ending the substantive portion of the case.

Final judgment was entered in favor of the Plan on its reimbursement claim on August 24, 2004. Thirty-four days later, on September 27, 2004, the Plan filed a second motion seeking attorneys' fees from Bender and Todryk under § 1132(g) and added a claim for fees against Todryk pursuant to 28 U.S.C. § 1927, which authorizes the district court to award attorneys' fees as a sanction against an attorney who unreasonably and vexatiously multiplies the proceedings before it.

The district court denied the Plan's motion for fees. With respect to the 29 U.S.C. § 1132(g) claim, the court held that the motion was untimely under FED. R. CIV. P. 54(d)(2)(B), which requires such motions to be filed within 14 days after entry of judgment. The court also held that § 1927 did not apply because the Plan's allegations against Todryk related solely to his prelitigation conduct in failing to inform the Plan of the original $50,000 insurance settlement, not a vexatious "multiplication" of federal court proceedings that would be sanctionable under the statute.

II. Discussion

A. Applicability of Rule 54(d)(2)

The Plan first claims that the district court erred in applying the 14-day time limit of Rule 54(d)(2)(B) to its claim for fees made pursuant to ERISA. The applicable section of ERISA, 29 U.S.C. ยง 1132(g)(1), provides: "In any action under this subchapter[,] . . . the court in its discretion may allow a reasonable attorney's fee and ...


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