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David E. Rogers v. Baxter International Inc. et al

March 16, 2011


The opinion of the court was delivered by: Judge Joan B. Gottschall



Plaintiff David E. Rogers filed this class action lawsuit under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq., against a number of defendants including Baxter International Inc. ("Baxter"), Harry M. Jansen Kraemer, Jr., Baxter's former CEO, and Brian P. Anderson, Baxter's former CFO. The defendants ultimately prevailed, and Baxter, Kraemer, and Anderson now ask the court to award them their costs in this litigation.


Anderson has filed a motion asking for $190,580.95 in costs, and Baxter and Kraemer have filed a motion for $306,251.26 in costs.

A.Standard for Awarding Costs Under ERISA

In support of their motions, defendants cite Federal Rule of Civil Procedure 54(d)(1). The rule provides: "Unless a federal statute, these rules, or a court order provides otherwise, costs-other than attorney's fees-should be allowed to the prevailing party. . . ." Under the rule, a prevailing party is presumptively entitled to an award of costs, but the district court retains discretion to decide on a case-by-case basis whether the award is appropriate.*fn1 Weeks v. Samsung Heavy Indus. Co., Ltd., 126 F.3d 926, 945 (7th Cir. 1997). The court's discretion is not limitless, and, "[g]enerally, only misconduct by the prevailing party worthy of a penalty or the losing party's inability to pay will suffice to justify denying costs." Id.

Rogers contends, however, that the fee-shifting provision in ERISA trumps Rule 54, and that ERISA sets a higher bar for awarding costs. ERISA provides: "In any action under this subchapter . . . by a participant, beneficiary, or fiduciary, 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). Although the statute, by its terms, gives the court discretion, Seventh Circuit cases discussing the propriety of an award of attorney's fees under § 1132(g)(1) have constrained that discretion by permitting fee-shifting only when the loser's position did not have "substantial justification." Sullivan v. William A. Randolph, Inc., 504 F.3d 665, 670 (7th Cir. 2007). To be substantially justified means "something more than non-frivolous, but something less than meritorious." Stark v. PPM America, Inc., 354 F.3d 666, 673 (7th Cir. 2004). *fn2 Rogers argues that the "substantially justified" standard also applies to awards of costs.

Both parties cite cases from this judicial district supporting their position. Compare Loomis v. Exelon Corp., No. 06 CV 4900, 2010 WL 1005037, at *1 (N.D. Ill. Mar. 11, 2010) (requests for costs in ERISA cases governed by Rule 54), and Armstrong v. Amsted Indus., Inc., No. 01 C 2963, 2004 WL 2480998, at *1 (N.D. Ill. Nov. 3, 2004) (same), with George v. Kraft Foods Global, Inc., No. 07-1713, 2010 WL 1976826, at *3 (N.D. Ill. May 14, 2010) (all requests for fees and costs in ERISA cases governed by § 1132(g)(1) and "substantially justified" test), and Brieger v. Tellabs, Inc., 652 F. Supp. 2d 925, 926-27 (N.D. Ill. 2009) (same). The cases cited by defendants have relied on Seventh Circuit decisions affirming awards of costs under Rule 54. See White v. Sundstrand Corp., 256 F.3d 580, 585-86 (7th Cir. 2001); Quinn, 161 F.3d at 478-79. But these appellate decisions affirm the awards without discussing the potential conflict between the Federal Rules and § 1132(g)(1). It seems apparent that the issue was never raised, and thus the Seventh Circuit has never decided whether ERISA trumps Rule 54.

The cases cited by Rogers point to the text of Rule 54 and ERISA. The presumption of Rule 54(d)(1) applies "[u]nless a federal statute . . . provides otherwise." Fed. R. Civ. P. 54(d)(1). And the fees provision in ERISA expressly gives the court discretion to award both attorney's fees and "costs of action." 29 U.S.C. § 1132(g)(1). The plain language of these provisions thus suggests that a court should look to ERISA rather than Rule 54 in deciding whether to award costs. George, 2010 WL 1976826, at *2. This interpretation makes sense in light of the Supreme Court's recent decision in Hardt. In Hardt, the Court held, contrary to previous Seventh Circuit law,*fn3 that § 1132(g)(1) permitted a court to award attorney's fees even though the claimant was not a "prevailing party." 130 S. Ct. at 2156. The Court set forth a less demanding standard: "a fees claimant must show 'some degree of success on the merits' before a court may award attorney's fees under § 1132(g)(1)." Id. at 2158. The Court focused on the fact that the text of § 1132(g)(1) did not contain the words "prevailing party." Id. at 2156. In contrast to the ERISA provision, the Federal Rules expressly allow costs only to the "prevailing party." Fed. R. Civ. P. 54(d)(1). Given the Supreme Court's analysis in Hardt, it seems clear that the plain language of ERISA allows a court more leeway in awarding costs than under Rule 54, because § 1132(g)(1) gives the court discretion to award "costs of action" but does not impose a "prevailing party" requirement.

It does not follow from this analysis, however, that the court must use the "substantially justified" test in determining whether to award costs in an ERISA action. That test was formulated by the Seventh Circuit as a constraint on the court's discretion when considering an award of attorney's fees. Bittner, 728 F.2d at 828-30. In explaining the "substantially justified" standard, the Bittner court contrasted the legislative history and purpose of ERISA with that of the Civil Rights Attorney's Fees Awards Act, which was designed to encourage civil rights litigation "by allowing prevailing plaintiffs to obtain an award of attorney's fees almost as a matter of course." Id. at 829. "There is nothing comparable in the legislative history of ERISA; nor do pension plan participants and beneficiaries constitute a vulnerable group whose members need special encouragement to exercise their legal rights, like a racial minority." Id. The court adopted the "substantially justified" test as "a model for courts that must try to give meaning to the word 'discretion'" in § 1132(g)(1). Id. at 830. The court described the standard as "the intermediate position between automatic fee shifting (or nearly automatic, as in the Civil Rights Attorney's Fees Awards Act) and the common law position which allows shifting only against the frivolous litigant." Id.*fn4

But the common law treats costs differently than attorney's fees. Rule 54(d)(1) borrows its discretionary standard from the common law rule in equity courts before the enactment of the Federal Rules. Charles Alan Wright, Arthur R. Miller, & Mary Kay Kane, 10 Federal Practice and Procedure § 2665 at 199-201 (3d ed. 1998). In courts of law, shifting of costs was generally mandatory. Id. Given these background rules on cost-shifting, it makes little sense to assume that Congress intended to prevent an award of costs under § 1132(g)(1) in a large proportion of ERISA cases.*fn5 Because both parties assumed that the "substantially justified" test would apply to any awards under § 1132(g)(1), neither side points to any legislative history of ERISA which could shed light on the intentions of Congress. The most sensible approach to § 1132(g)(1) is to borrow the widely-used standard for awarding costs under Rule 54(d)(1)-giving the court discretion but starting with a presumption in favor of awarding costs-with the exception, after Hardt, that costs are available to a party who has achieved "some degree of success on the merits." Nothing in the text of § 1132(g)(1) suggests a different standard.*fn6

Applying the standard to this case, the court will award costs to defendants. As previously stated, the general rule is that costs should be denied only when the successful party has committed some misconduct or an award would otherwise be unjust. Rogers is unable to identify any special circumstance which would make an award of costs in this case unjust. He asserts that "to require Rogers, an individual 401(k) plan participant, to pay $500,000 dollars in an ERISA case to a Fortune 500 company would be a real injustice." (Rogers' Resp. at 7.) But Rogers does not provide the court with any details about his ability to pay. Nor does he inform the court whether or not he ...

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