F I L E D
United States Court of Appeals
Tenth Circuit
APR 3 1998
UNITED STATES COURT OF APPEALS
TENTH CIRCUIT PATRICK FISHER
Clerk
NELSON B. PHELPS, individually
and as representative of all pre-
January 1, 1991, Plan Participants and
Plan Beneficiaries and for the benefit
of U.S. WEST RETIREE HEALTH
CARE MEDICAL PLANS AND U.S. No. 97-1270
WEST RETIREE DENTAL CARE
PLANS, (D. Colorado)
Plaintiffs - Appellants, (D.C. No. 95-Z-2759)
v.
U.S. WEST, INC., and U.S. WEST,
INC., EMPLOYEES’ BENEFIT
COMMITTEE,
Defendants - Appellees.
ORDER AND JUDGMENT *
Before SEYMOUR, ANDERSON, and LUCERO, Circuit Judges.
*
This order and judgment is not binding precedent, except under the doctrines of
law of the case, res judicata, and collateral estoppel. The court generally disfavors the
citation of orders and judgments; nevertheless, an order and judgment may be cited under
the terms and conditions of 10th Cir. R. 36.3.
Nelson B. Phelps appeals from the district court’s denial of his motion for
attorney’s fees under the Employee Retirement Income Security Act (“ERISA”)
§ 502(g)(1), 29 U.S.C. § 1132(g)(1). Phelps argues on appeal that the district
court abused its discretion in denying his motion for attorney’s fees because he
was the “prevailing party” in the litigation, and the factors used in determining
whether to grant attorney’s fees under § 502(g)(1) weigh in his favor. We affirm.
BACKGROUND
In March 1990, Mr. Phelps retired from his position as an Executive
Director of US West Human Resources. When he retired, Phelps, along with
approximately 30,000 other former US West employees who retired prior to
January 1, 1991, was covered by the US West Health Care Medical Plan (“the
Plan”). 1 The Plan is a traditional indemnity plan, 2 and at the time he retired,
Phelps was assured by US West representatives that “US West was committed to
1
There are actually nine retiree health care plans at issue here. See Appellant’s Br.
at 3-4. For purposes of clarity in this opinion, they will be referred to collectively as “the
Plan.” US West is the sponsor of the Plan, and US West’s Employees’ Benefit
Committee (“EBC”) is the named fiduciary and plan administrator. Id.
2
This means that generally, plan participants may visit almost any health-care
provider, but they are responsible for an annual deductible and co-insurance for office
visits. Plan participants are reimbursed for reasonable and customary expenses.
Appellant’s App. at 201.
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providing . . . health and dental care benefits for life and that the level of
coverage would not be reduced.” Appellant’s Br. at 4.
Five years after Phelps retired, however, US West began what Phelps
perceived as a concentrated campaign “to enroll the 30,000 pre-’91 retirees in
Health Maintenance Organizations (‘HMOs’).” Appellant’s Br. at 5. Phelps
viewed the use of HMOs as a reduction in the level of his health care and became
concerned that none of US West’s guarantees of lifetime unreduced indemnity
plan coverage were memorialized in the governing Plan documents. In particular,
Phelps was concerned by the Plan’s reservation-of-rights clause, which stated that
US West “reserves the right to terminate or amend [the Plan] at any time with
respect to any or all classes of current or future Participants (including Retired
Employees), subject to applicable limitations of the law.” Appellant’s App. at
114.
Because of his concern, in August 1995, Phelps filed a class-wide
administrative claim with the EBC, demanding that the EBC obtain a resolution
from the US West, Inc., Board of Directors formally acknowledging that US West
was contractually bound not to reduce or eliminate lifetime health coverage for
pre-1991 retirees. Appellant’s App. at 117. Phelps also demanded that the EBC
amend the Plan by eliminating the reservation-of-rights clause and inserting
language memorializing its commitment to the pre-1991 retirees. Id. Then, in
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November, before receiving a response to his administrative claim, 3 Phelps filed a
federal class action suit against US West under ERISA § 502(a)(3)(B), 29 U.S.C.
§ 1132(a)(3)(B), seeking injunctive relief and an order declaring the rights of all
pre-1991 retirees to lifetime, unreduced indemnity-plan coverage.
About a week after Phelps filed his lawsuit, the EBC denied his
administrative claim because it had “no authority to require the US West, Inc.
Board of Directors to issue resolutions of any nature.” Appellant’s App. at 215.
The EBC nevertheless assured Phelps that “[g]iven that the Company has clearly,
publically [sic], and continually acknowledged its health care commitment to pre-
1991 retirees, the Plan will be amended to formalize this long-standing
commitment.” Id. Phelps’ appeal of this decision was denied.
Approximately two months later, in January 1996, US West formally
amended the Plan’s language to guarantee unreduced lifetime indemnity plan
coverage to every employee that retired prior to 1991. Phelps nevertheless
proceeded with his lawsuit because he remained concerned that language in the
3
US West’s traditional administrative procedure allows the company 90 days to
respond to administrative claims. Appellant’s App. at 214. Although he was aware of the
general 90-day response period, Appellant’s App. at 261, Phelps filed his lawsuit in
federal court after only 75 days. Phelps asserts that he was not required under ERISA to
exhaust administrative remedies because his claim was not a claim for payment of
benefits. Appellant’s Br. at 6 n.1.
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amendment allowed US West to freeze “reasonable and customary charge
reimbursement schedules” at January 1996 values.
Finally, in February 1996, during the deposition of the Secretary of the
EBC, US West resolved Phelps’ lingering question regarding the reimbursement
schedules, and the parties entered into a stipulation of dismissal. The next day,
Phelps filed a motion seeking attorney fees of $27,072.50 pursuant to ERISA
§ 502(g)(1), 29 U.S.C. § 1132(g)(1), and requesting an evidentiary hearing.
Appellant’s App. at 61. The district court referred the matter to a Magistrate
Judge.
After extensive briefing and the submission of evidence, 4 the Magistrate
recommended that the district court deny Phelps’ motion for attorney fees because
Phelps complains that although the Magistrate Judge originally granted an
4
evidentiary hearing, he subsequently vacated the evidentiary hearing and then denied
Phelps’ demand for permission to supplement the briefs by submitting additional exhibits
(although he did allow Phelps to supplement his briefs with additional authority). See
Appellant’s Br. at 24 n.5; Appellant’s App. at 312-13, 320, 339. Because each party filed
a substantial number of affidavits and exhibits, see Appellant’s App. at 73-280, 285-309,
and because Phelps’ request to supplement was made more than a year after briefing was
completed and included many exhibits already in the record, we cannot say that the
Magistrate Judge erred in his decision to not consider further evidence. See Florence
Nightingale Nursing Serv. Inc. v. Blue Cross/Blue Shield of Alabama, 41 F.3d 1476,
1485 (11th Cir. 1995) (stating that evidentiary hearings are not required on the attorney’s
fee issue).
Phelps also complains that because the Magistrate Judge did not comment on
Phelps’ affidavit in his recommendation, he must not have even considered it.
Appellant’s Br. at 23. We find this assertion unpersuasive.
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Phelps was not the prevailing party in the litigation and because the factors used
to determine whether to grant attorney’s fees under § 502(g)(1) did not weigh in
his favor. Appellant’s App. at 342-44. After considering Phelps’ objections to
the Magistrate’s recommendation and US West’s response, the district court
adopted the Magistrate’s recommendation and denied Phelps’ motion for
attorney’s fees. Phelps filed a timely notice of appeal.
DISCUSSION
We review the district court’s decision whether to award attorney’s fees for
an abuse of discretion and will reverse “only upon reaching ‘a definite conviction
that the court, upon weighing relevant factors, clearly erred in its judgment.’”
Thorpe v. Retirement Plan of Pillsbury Co., 80 F.3d 439, 445 (10th Cir. 1996)
(quoting Gordon v. United States Steel Corp., 724 F.2d 106, 108 (10th Cir.
1983)).
ERISA provides that in any action brought by an ERISA plan participant,
“the court in its discretion may allow a reasonable attorney’s fee and costs of
action to either party.” ERISA § 502(g)(1), 29 U.S.C. § 1132(g)(1). Although
the statute is not express on this point, most courts, including this one, have
interpreted ERISA to allow an award of attorney’s fees only to prevailing parties.
See, e.g., Kaiser Steel Corp. v. Mullins, 455 U.S. 72, 89 n.14 (1982); Arfsten v.
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Frontier Airlines, Inc. Retirement Plan for Pilots, 967 F.2d 438, 442 n.3 (10th Cir.
1992); Martin v. Blue Cross & Blue Shield of Va., Inc., 115 F.3d 1201, 1210 (4th
Cir.) (collecting cases), cert. denied, 118 S. Ct. 629 (1997). But see Tourangeau
v. Uniroyal, Inc., 101 F.3d 300, 308 n.6 (2d Cir. 1996).
Phelps argues that he was the prevailing party because US West did not
begin “serious consideration” of the Plan amendment until after he filed his
administrative claim and lawsuit. Appellant’s Br. at 28-30. 5 The burden here,
however, is not on US West to show prior “serious consideration.” Rather,
because the suit was disposed of without full litigation on the merits, the burden
was on Phelps to show that his suit was a “catalyst” or “material factor” in
obtaining concessions from US West and that US West did not act for “wholly
gratuitous” reasons in response to his suit. See Hooper v. Demco, Inc., 37 F.3d
287, 292 (7th Cir. 1994) (quotations omitted).
While the timing of the amendment, as outlined above, may indirectly
support Phelps’ claim that he was the prevailing party, the evidence as a whole
does not. For example, although Phelps presented the affidavit of a Retiree
Advisory Board member, stating the Manager of Health Care Administration,
5
In the case cited by Phelps, we held that material misrepresentations about future
plan offerings do not constitute a breach of fiduciary duty under ERISA unless the
misrepresentations were made after the employer had “seriously considered” the future
offering. See Hockett v. Sun Co., 109 F.3d 1515, 1522-24 (10th Cir. 1997). The
“serious consideration” standard, as defined in Hockett, is inapplicable here.
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Marie Serold, had admitted that the Plan amendment was caused by Phelps’
lawsuit, Appellant’s App. at 90, US West presented the equally convincing
affidavit of Marie Serold herself, supported by the affidavit of another Retiree
Advisory Board member, stating that Serold had not attributed the Plan
amendment to Phelps’ lawsuit. Appellant’s App. at 230-31, 279. And although
Phelps presented a letter written by the President and CEO of US West
Communications, Inc., which stated that less than 24 hours after Phelps’ lawsuit
was filed, US West polled the EBC members and reached an agreement to amend
the Plan, Appellant’s App. at 123, US West presented the affidavit of the EBC’s
Secretary, which clarified that US West had been considering how to best resolve
this very issue since the spring of 1995 and was not motivated to act by Phelps’
lawsuit. Appellant’s App. at 202-03.
On the record as a whole, we cannot say that the district court abused its
discretion in determining that Phelps did not cause US West to amend the Plan
and thus was not the prevailing party in the litigation. Because we conclude that
Phelps did not meet the threshold requirement of showing he was the prevailing
party, it is unnecessary for us to reach Phelps’ argument that the factors used to
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determine whether to grant attorney’s fees under ERISA to prevailing parties
weigh in his favor. 6
CONCLUSION
We conclude that the district court did not abuse its discretion in denying
Phelps’ motion for attorney fees. 7
6
Because the granting of attorney’s fees under ERISA is not to be done as a matter
of course, in Gordon v. United States Steel Corp., we specified five nonexclusive factors
to guide the district court’s decision. These factors are:
(1) the degree of the opposing parties’ culpability or bad faith; (2) the
ability of the opposing parties to personally satisfy an award of attorney’s
fees; (3) whether an award of attorney’s fees against the opposing parties
would deter others from acting under similar circumstances; (4) whether the
parties requesting fees sought to benefit all participants and beneficiaries of
an ERISA plan or to resolve a significant legal question regarding ERISA;
and (5) the relative merits of the parties’ positions.
Gordon, 724 F.2d at 109. Here, the Magistrate Judge analyzed the Gordon factors and
found they did not weigh in Phelps’ favor. See Appellant’s App. at 342-44. We have
reviewed the record, and if we were to address this issue, we could not say the Magistrate
Judge’s view of the evidence is unreasonable or unsupported.
7
US West also argues that Phelps’ underlying claim was either unripe because US
West had never reduced or threatened to reduce the pre-1991 retirees’ health benefits, is
now moot because of the January 12, 1996, Plan amendment, or is barred by ERISA’s
three-year statute of limitations because Phelps should have been aware of the
reservation-of-rights clause when he retired in 1990. Appellee’s Br. at 13-15, 21 (citing
ERISA § 413(2)). Because we are affirming the district court’s denial of Phelps’
attorney’s fees, it is unnecessary for us to address these jurisdictional issues concerning
the underlying action. See Norton ex rel. Chiles v. Mathews, 427 U.S. 524, 532 (1976)
(stating that the Court has reserved difficult questions of jurisdiction “when the case
alternatively could be resolved on the merits in favor of the same party”).
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AFFIRMED.
ENTERED FOR THE COURT
Stephen H. Anderson
Circuit Judge
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