The opinion of the court was delivered by: Magistrate Judge Maria Valdez
MEMORANDUM OPINION AND ORDER
Before the Court is Defendant's Motion for Attorney's Fees and Costs [hereinafter Def.'s Mtn.][Doc. No. 73], Defendant's Rule 11 Motion for Sanctions [hereinafter Def.'s Rule 11 Mtn.] [Doc. No. 53], and Defendant's Motion for Sanctions for Failure to Comply with Court Orders [hereinafter Def.'s Rule 37 Mtn.] [Doc. No. 77]. The parties have consented to the jurisdiction of a United States Magistrate Judge pursuant to 28 U.S.C. § 636(c). For the reasons stated below, Defendant's Motion for Attorney's Fees and Costs [Doc. No. 73] is granted. Defendant's motions for sanctions under Rule 11 [Doc. No. 53] and under Rule 37 [Doc. No. 77] are denied.
I. Attorney's Fees and Related Nontaxable Expenses Under ERISA Under Section 502(g) of the Employee Retirement Income and Security Act (ERISA) in an action 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). In Hardt v. Reliance Standard Life Insurance Co., the Supreme Court recently interpreted ERISA's fee shifting provision, holding that a court may award fees to an ERISA litigant if they have achieved "some degree of success on the merits." Hardt v. Reliance Standard Life Insurance Co., 130 S.Ct. 2149, 2157-2158 (2010). This ruling supplanted the "prevailing party" standard for awarding fees in ERISA cases. Id.; see also Young v. Verizon's Bell Atlantic Cash Balance Plan, No. 05 C 7314, 2010 WL 4226445 at *4 (N.D. Ill Oct. 20, 2010).
There is no doubt that the Defendant achieved "some degree of success on the merits" as this Court awarded summary judgment in the Defendant's favor on all of the Plaintiff's claims. See Memorandum Opinion and Order [Doc. No. 61]. Once a party has achieved "some degree of success on the merits," a court must use its discretion to determine whether an attorney's fee should be granted. Hardt, 130 S.Ct. at 2158; see also Young, 2010 WL 4226445 at *6.
Prior to Hardt, the Seventh Circuit recognized two tests to guide a court's discretion under 29 U.S.C.§ 1132 (g)(1). Stark v. PPM America, Inc., 354 F.3d 666, 673 (7th Cir. 2004) (citing Quinn v. Blue Cross & Blue Shield Ass'n, 161 F.3d 472, 478 (7th Cir. 1998)). Both tests essentially ask the same question, "was the losing party's position substantially justified and taken in good faith, or was the party simply out to harass the opponent?" Stark, 354 F.3d at 673 (quoting Bowerman v. Mal-Mart Stores, Inc., 226 F.3d 574, 593 (7th Cir. 2000)).
The first test assesses whether the losing party's position was both "substantially justified" and "taken in good faith." Herman v. Central States, S.E. and S.W. Areas Pension Fund, 423 F.3d 684, 696 (7th Cir. 2005). A position is not substantially justified if it is "without a solid basis." Prod. & Maint. Employees' Local 504 v. Roadmaster Corp., 954 F.2d 1397, 1405 (7th Cir. 1992). Substantial justification means "something more than non-frivolous, but something less than meritorious." Stark v. PPM America, Inc., 354 F.3d 666, 673 (7th Cir. 2004). The absence of good faith describes a party that has "in an objective sense, really done nothing more than harass his opponent by putting him through the expense and bother of litigation for no good reason." Prod. & Maint. Employees' Local 504, 954 F.2d at 1405.
The second test analyzes 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. Quinn, 161 F.3d at 478. When employing the five-factor test, not all factors need be present to conclude that an award of fees is appropriate; rather, "the five factor test involves a weighing of the relevant factors as they apply to the facts of a particular case." Lockrey v. Leavitt Tube Employees' Profit Sharing Plan, No. 88 C 8017, 1991 WL 255466 at *2 (N.D. Ill. Nov. 22, 1991). The five-factor test is used to "structure or implement, rather than to contradict" the substantially justified test. Little v. Cox's Supermarkets, 71 F. 3d 637, 644 (7th Cir. 1995).
The five-factor test, however, is geared more toward cases where the plaintiff is the prevailing party. Bittner v. Sadoff & Rudoy Indus., 728 F.2d 820, 829 (7th Cir. 1984), overruled on other grounds by McCarter v. Retirement Plan for Dist. Managers of Am. Family Ins. Grp., 540 F.3d 649 (7th Cir. 2008). And, both the Seventh Circuit and the Supreme Court have questioned the test's continued vitality. See Sullivan, 504 F.3d at 672 (noting that the five-factor test "adds little . . . to the simpler test, and perhaps has outlived its usefulness"); Hardt,130 S.Ct. at 2158 (observing that because the five-factor tests used by a number of circuits "bear no obvious relation to § 1132(g)(1)'s text or to our feeshifting jurisprudence, they are not required for channeling a court's discretion when awarding fees under this section").
Since Hardt, the Seventh Circuit has not had the opportunity to decide whether the substantial justification and five-factor tests are still relevant. Courts in this district have questioned the ongoing utility of either test.*fn1 However, two courts have recently applied the test even though they acknowledge the continued application of the test is an open question. See Raybourne, 2011 WL 528864, at *2; Young, 2010 WL 4226445 at *9. Nonetheless, under either inquiry, an award of fees under ERISA is warranted in this case.
a. Substantial Justification Test
Defendant argues that Plaintiff's claims were not substantially justified (i.e. did not have a "solid basis") as each of the claims "lacked both evidentiary and legal support." Defendant's Memorandum of Law in Support of Motion for an Award of Attorneys' Fees and Non-Taxable Costs [hereinafter Def.'s Mem.] at 4 [Doc. No. 73-1]. Defendant contends that the six grounds on which this Court granted summary judgment demonstrate that Plaintiff's claims were not substantially justified and were not taken in good faith. Each of the six grounds will be addressed separately below.
2011).Judge Gettlemen refers to Magistrate Judge Denlow's analysis in Young v. Verizon's Bell Atlantic Cash Balance Plan:
Because "some success' represents the new threshold to an ERISA fee award, the substantial justification test makes little sense. If one party has experienced only some success, then the opposing party, almost by definition, has also achieved some success. If so, the opposing party's position will often be non-frivolous- that is, substantially justified. Applying a substantial justification test where the threshold for fee eligibility is only some success therefore undermines the broader eligibility for fees that should exist when the fee provision lacks a "prevailing party" requirement.
i. Plaintiff 's lack of standing.
This Court found that the Plaintiff had no standing under ERISA as a participant because the Plan's anti-assignment provision "clearly and unambiguously prohibits the assignment of benefits" and rendered Plaintiff unable to become a beneficiary of the Plan. Memorandum Opinion and Order [hereinafter Mem. Opin. & Order] at 8-9 [Doc. No. 61]. Accordingly, Defendant argues that Plaintiff was not substantially justified in putting forth either the benefit claim or the penalty claim because the Plan Document clearly stated that the Plan's anti-assignment provision applied to all claims and that the Plaintiff "did not cite any cases to call into question the well-established case law that the terms of a plan document controls." Def.'s Mem at 5 [Doc. No. 73-1].
Plaintiff responds by stating that he "believed that the insured had assigned Plaintiff his right under the Plan, including the right to enforce the penalty under 29 U.S.C. Section 1132 (c)(1)." Plaintiff's Response to Rule 11 Motion for Sanctions [hereinafter Pl.'s Resp.] at 4 [Doc. No. 82].*fn2 However, as Defendant correctly notes, the Seventh Circuit looks to objective, not subjective, findings of substantial justification and good faith. See Prod. & Maint. Employees' Local 504, 954 F.2d at 1405) ; see also Anderson, Trustee on Behalf of Painters' District Council No. 30 Health and Welfare Fund v. Dergance, No. 08 C 2522, 2009 WL 3151172, at *1, (N.D. Ill. Sept. 22, 2009) ("The absence of good faith does not require a subjective finding of bad faith, but rather describes 'a party who pursues a position without a solid basis.'") (quoting Prod. & Maint. Employees' Local 504, 954 F.2d at 1405). Plaintiff's subjective belief that he had a valid assignment is insufficient to demonstrate substantial justification or good faith.
Plaintiff further argues that he can establish good faith as evidenced by his use of an assignment form, required under Section 2017.40 of the Illinois Administrative Code, which "shows that Plaintiff had a good faith basis for his belief that the assignment was valid or that there was ambiguity as to whether the Plan could prohibit his assignment." Pl.'s Resp. at 4 [Doc. No. 82]. However, neither the form nor its instructions grant Plaintiff any rights of a participant with respect to the Fund. Thus, there is no objective basis for the Plaintiff to believe there was a valid assignment.
Accordingly, this Court finds that Plaintiff was not substantially justified in filing the benefit and penalty claim as the Plaintiff lacked standing under ERISA due to the Plan's anti-assignment provision.
ii. Failure to exhaust plan remedies.
Additionally, this Court found that because Plaintiff failed to exhaust the Plan's internal administrative remedies, his benefits claim was barred. Mem. Opin. & Order at 12 [Doc. No. 61]. This Court deemed the February 3, 2000 letter proffered by the Plaintiff to be inadmissible as it could not properly be authenticated. Id. at 11-12. Defendant argued that because of this Court's findings, the Plaintiff's benefit's claim was not substantially justified.
Plaintiff did not directly address these arguments in his response but merely reiterated, "Plaintiff produced a copy of a letter dated February 3, 2000 in which he requested an appeal and a copy of the Plan. Defendant did not respond to the letter." Pl.'s Resp. at 3 [Doc. No. 82]. As the February 3, 2000 letter was deemed inadmissible, and Plaintiff offered no other admissible evidence that he had exhausted internal administrative remedies, this Court finds that benefits claim was not substantially justified. See Stark v. PPM America, Inc., 354 F.3d 666, 673 (7th Cir. 2004) (affirming that plaintiff's position was not "substantially justified" when plaintiff failed to exhaust plan remedies by not following required procedures).
iii. Plaintiff lacked a colorable claim for benefits when he requested plan documents from the Fund.
Next, this Court determined that Plaintiff's lack of standing and his subsequent failure to exhaust the Plan's internal administrative remedies barred the penalties claim. Mem. Opin. & Order at 13 [Doc. No. 61]. Defendant argues that without a colorable benefits claim, Plaintiff was not substantially justified in pursuing the penalties claim. Plaintiff does not directly respond to this argument but offers a broad statement that he acted in good faith. Pl.'s Resp. at 5 [Doc. No. 82]. As indicated above, a subjective belief is insufficient to demonstrate substantial justification and good faith. See Prod. & Maint. Employees' Local 504, 954 F.2d at 1405); Anderson,, 2009 WL 3151172, at *1. Therefore, this Court finds that Plaintiff's penalties claim was not substantially justified as the benefits claim lacked both a legal or an evidentiary basis.
iv. The benefit claim was barred by the Plan's three-year statute of limitations.
This Court further held that the Plan's three-year contractual limitations period applied to and barred Plaintiff's benefits claim. Mem. Opin. & Order at 15 [Doc. No. 61]. This Court explained that a limitations period set forth in an ERISA plan is enforceable, regardless of state law, as long as it is reasonable and that a review of the record established that the three-year limitations period was more than reasonable. Id. at 13-14 (citing Abena v. Metropolitan Life Ins. Co., 544 F.3d 880, 884 (7th Cir. 2008)). Defendant argues that based on this reasoning, Plaintiff's benefits claim was not substantially justified.
Plaintiff did not address the reasonableness and applicability of the three-year statute of limitations period for the benefits claim in his Response. As such, this Court finds that Plaintiff's benefits claim was not substantially justified as it was time barred. v. The penalty claim was barred by the applicable state statute of limitations.
Next, this Court previously found that the application of the two-year statute of limitations rendered the penalties claim time-barred. Id. at 16. Defendant argues that the penalty claim was not substantially ...