In the
United States Court of Appeals
For the Seventh Circuit
Nos. 10-2284 & 10-3046
K OLBE & K OLBE H EALTH & W ELFARE
B ENEFIT P LAN, et al.,
Plaintiffs-Appellants,
v.
T HE M EDICAL C OLLEGE OF W ISCONSIN,
INC., et al.,
Defendants-Appellees.
Appeals from the United States District Court
for the Western District of Wisconsin.
No. 09-CV-205—Barbara B. Crabb, Judge.
A RGUED JANUARY 10, 2011—D ECIDED S EPTEMBER 2, 2011
Before, F LAUM and W ILLIAMS, Circuit Judges, and
H ERNDON, District Judge.
The Honorable David R. Herndon, Chief Judge, United States
District Court for the Southern District of Illinois, sitting by
designation.
2 Nos. 10-2284 & 10-3046
H ERNDON, District Judge. This is a suit by Kolbe & Kolbe
Welfare Benefit Plan (the Plan), a self-funded employee
welfare benefit plan, and its administrator and plan
fiduciary, Kolbe & Kolbe Millwork Company (Kolbe &
Kolbe) (collectively plaintiffs unless context dictates
otherwise),1 for the right to recover amounts the Plan
paid on behalf of an uncovered person under the
Plan to The Medical College of Wisconsin, Inc. (Medical
College) and Children’s Hospital of Wisconsin, Inc. (Chil-
dren’s Hospital) (collectively defendants unless context
dictates otherwise). Plaintiffs brought suit alleging
claims under the Employee Retirement Income Security
Act of 1974 , 29 U.S.C. §§ 1001, et seq. (ERISA), the federal
common law of ERISA, and under state law. Over the
course of several orders, the district court dismissed the
complaint for failure to state a claim upon which relief
could be granted and also granted attorney fees to the
defendants. The attorney fees were the subject of a
separate judgment and appeal (10-3026), however, this
court, on its own motion, consolidated the appeals for
briefing and disposition. For the reasons that follow, we
affirm in part, reverse in part, and remand for further
proceedings.
1
Only Kolbe & Kolbe is a fiduciary and therefore a proper
plaintiff under § 502(a)(3) of the Employee Retirement Income
Security Act, 29 U.S.C. § 1132(a)(3), but we will ignore that
detail. See Wal-Mart Stores, Inc. v. Wells, 213 F.3d 398, 400 (7th
Cir. 2000); Admin. Comm. v. Gauf, 188 F.3d 767, 770 (7th Cir.
1999).
Nos. 10-2284 & 10-3046 3
I. B ACKGROUND
According to the plaintiffs’ second amended complaint,
the facts of which we accept as true, Dawson v. Newman,
419 F.3d 656, 658 (7th Cir. 2005), Kolbe & Kolbe, sponsors
and administers the Plan, a self-funded welfare benefit
plan covered by ERISA that Kolbe & Kolbe offers to its
employees. Scott Gurzynski was a Kolbe & Kolbe em-
ployee who was covered under the Plan. On approxi-
mately August 20, 2007, Gurzynski submitted to Kolbe &
Kolbe an employee enrollment change form, seeking to
add his daughter, K.G., born earlier that year, to the
Plan. On the form, however, Gurzynski left several
sections blank that were needed to determine whether
his daughter would be covered as an eligible dependant
under the Plan. Specifically, he did not indicate on the
form whether the child resided with the employee, was
dependent upon the employee for more than fifty
percent support and maintenance, and whether the
child qualified to be claimed as a tax exemption on the
employee’s or the employee’s spouse’s federal income
tax return.
Because Gurzynski’s employee enrollment change
form was incomplete, Kolbe & Kolbe made numerous
inquiries of Gurzynski to try and obtain the informa-
tion necessary to determine whether K.G. was eligible to
be covered under the Plan. Over three months later, on
approximately November 28, 2007, Gurzynski informed
Kolbe & Kolbe over the telephone that K.G. did not
reside with him but rather lived with K.G.’s mother and
that he was not claiming K.G. as a tax exemption. Ap-
4 Nos. 10-2284 & 10-3046
proximately two days later, Kolbe & Kolbe met with
Gurzynski and informed him that it needed additional
information and requested Gurzynski to send it to Kolbe
& Kolbe as soon as possible. Thereafter, Kolbe & Kolbe
made numerous attempts to solicit from Gurzynski the
information Kolbe & Kolbe deemed necessary to make
a coverage determination. After several months of
inquiry, Kolbe & Kolbe reviewed the still inadequate
information that it was able to obtain from Gurzynski
and denied Gurzynski’s request for coverage under the
Plan for K.G. On June 24, 2008, over ten months from the
date of Gurzynski’s application, Kolbe & Kolbe sent
Gurzynski notification of this decision by letter,
informing Gurzynski that K.G. was not eligible for cover-
age during 2007 and that any claims submitted to the
Plan since January 1, 2007, would be reprocessed. No
appeal of this decision was ever filed.
The Plan contained a “Right to Request Overpayments”
provision. That provision provided as follows:
“The Plan reserves the right to recover any payments
made by the Plan that were:
! Made in error; or
! Made after the date the person should
have been terminated under this Plan; or
! Made to any Covered Person or any party on
a Covered Person’s behalf where the em-
ployer determines the payment to the Cov-
ered Person or any party is greater than
the amount payable under this Plan.
Nos. 10-2284 & 10-3046 5
The Plan has the right to recover against Covered
Persons if the Plan has paid them or any other party
on their behalf.”
The Plan defined “Covered Person” as “an Employee or
Dependent who are [sic] enrolled under this Plan.” Both
the definition of “Employee” and “Dependent” direct to
“see [the] Eligibility and Enrollment section of this [Sum-
mary Plan Description.]”
From the time Gurzynski’s form was submitted, and
before, until the time the decision was made to deny
coverage, K.G. was treated as an inpatient at Children’s
Hospital by physicians of the Medical College on at
least four separate occasions (August 3, 2007, Septem-
ber 27, 2007, January 4, 2008, and February 8, 2008). K.G.
received discounted treatment from Children’s Hospital
and Medical College because both defendants had
entered into physician or provider agreements (the pro-
vider agreements) with third-party network providers 2
who had entered into member or service agreements
with Kolbe & Kolbe 3 whereby Kolbe & Kolbe agreed to
pay a fee in exchange for discounted health services that
the third-party network providers had procured with
2
Medical College entered into a physician agreement with
North Central Health Care Alliance, Inc. (NCHA), and Chil-
dren’s Hospital, an affiliate of Children’s Health System,
entered into a provider agreement with Bowers & Associates,
Inc. (Bowers).
3
Kolbe & Kolbe entered into a member agreement with NCHA
and a physician agreement with Bowers.
6 Nos. 10-2284 & 10-3046
Medical College and Children’s Hospital in the provider
agreements. Under the terms of the provider agree-
ments, Medical College and Children’s Hospital agreed
to provide “Covered Services” to eligible Plan employees
and their dependents. “Covered Services” was defined
to mean those medical services covered under a Plan,
subject to any limitations on such coverage as may con-
tained in such Plan.4 Kolbe & Kolbe was listed as a third-
party beneficiary of the provider agreements.
Upon each admission to Children’s Hospital, either
K.G.’s mother or Gurzynski executed a Children’s
Hospital and Health System (CHHS) agreement on
behalf of K.G., which included a “financial agreement”
provision that stated as follows: “I hereby assign all
insurance benefits, to which the patient is entitled, to
CHHS or to any physician or provider who may
provide care to the patient during treatment. I understand
that I am financially responsible to the above providers
for charges not covered by insurance.”
Following K.G.’s treatment, Medical College and Chil-
dren’s Hospital submitted invoices and requests for
payment to the Plan.5 The Plan made payments in the
amount of $472,357.84 to Medical College and $1,199,538.58
4
The provider agreements are not entirely the same, but for
purposes of our discussion, noting their differences would not
be beneficial to our analysis.
5
In fact, payments were submitted and made through the
Plan’s third-party administrator, United HealthCare Services,
Inc., but for the sake of clarity we refer only to the Plan.
Nos. 10-2284 & 10-3046 7
to Children’s Hospital. Because Kolbe & Kolbe deter-
mined that K.G. was not covered under the Plan, however,
Kolbe & Kolbe made demands to Medical College and
Children’s Hospital to return all payments made by the
Plan. Both Medical College and Children’s Hospital
refused, leading to this lawsuit.
On April 6, 2009, plaintiffs filed their complaint, and on
May 4, 2009, defendants filed a motion to dismiss. Prior
to the court ruling on that motion, plaintiffs filed an
amended complaint and defendants filed a motion to
dismiss the amended complaint, specifically plaintiffs’
§ 502(a)(3) count under ERISA. Defendants attached
the Plan in support of its motion. On October 6, 2009, the
court entered an opinion and order, concluding “that
plaintiffs have not stated a plausible claim for relief
under § 502(a)(3) . . . [but allowed] them an opportunity
to add to their complaint factual allegations that would
show that they have plausible grounds for asserting an
equitable lien against defendants.” Kolbe & Kolbe Health
& Welfare Benefit Plan v. Med. Coll. of Wis., Inc., 2009 U.S.
Dist. LEXIS 93067, at *2 (W.D. Wis. Oct. 6, 2009). The court
also noted that “ordinarily, in ruling on a motion to
dismiss, under Rule 12(b)(6), the court may consider
only the complaint,” but concluded that “in cases
like this one, in which plaintiffs have referred to a docu-
ment . . . in the complaint and the document is
central to the claims at issue, the court may consider
it as part of the pleadings.” Id. at *3 (citing F ED. R. C IV.
P. 10(c)). Thus, the court also considered the Plan defen-
dants submitted and ordered plaintiffs “to file copies of
any agreements between them that would bear on plain-
8 Nos. 10-2284 & 10-3046
tiffs’ right to pursue equitable relief, together with any
supplemental briefing they wish to submit.” Id. at *3, *20.
On October 21, 2009, plaintiffs filed their second
amended complaint, seeking to recover under three
theories: (1) equitable relief under § 502(a)(3) of ERISA;
(2) an independent cause of action under the federal
common law of unjust enrichment; and (3) relief for
breach of contract under state law. Attached to the com-
plaint were nine exhibits: a physician agreement
between Medical College and NCHA; a member agree-
ment between Kolbe & Kolbe and NCHA; a provider
agreement between Children’s Hospital6 and Bowers; a
physician agreement between Children’s Medical Group
and Bowers; a services agreement between Bowers and
Kolbe & Kolbe; and four CHHS agreements, two of
which were signed by K.G.’s mother and two signed by
Gurzynski.
Defendants filed a motion to dismiss the second
amended complaint, specifically plaintiffs’ claim under
§ 502(a)(3) of ERISA. On November 17, 2009, the court
found that plaintiffs had failed to state a claim upon
which relief could be granted under § 502(a)(3) because
they were seeking legal as opposed to equitable relief.
The court then gave the parties an opportunity to
submit briefs on the question of whether plaintiffs had
a viable federal common law claim of unjust enrich-
6
In fact, it was between Children’s Health System and its
affiliated entities, which includes Children’s Hospital and,
Bowers.
Nos. 10-2284 & 10-3046 9
ment. The parties filed supplemental briefs and on Febru-
ary 9, 2010, the court entered an order finding that plain-
tiffs could not bring a federal common law claim for
unjust enrichment because plaintiffs were seeking legal
relief precluded by ERISA. This left plaintiffs’ state
law breach of contract claims, which the court again
allowed the parties to brief. The parties did so, and on
April 29, 2010, the court entered an order finding that
plaintiffs could not pursue their state law claim because
the claim clearly related to the Plan and was therefore
preempted by ERISA.
Defendants then moved for attorney fees under
ERISA § 502(g)(1), which the court also granted. Plaintiffs
timely appealed, contending that the district court erred
in dismissing each of their claims and in awarding de-
fendants attorney fees because plaintiffs’ position was
substantially justified. The Wisconsin Association of
Health Underwriters has filed a brief in support of plain-
tiffs as amicus curiae. We address each argument in turn.
II. S TANDARD OF R EVIEW
“We review the grant of a motion to dismiss for failure
to state a claim de novo.” Reynolds v. CB Sports Bar, Inc.,
623 F.3d 1143, 1146 (7th Cir. 2010) (citing Reger Dev. LLC
v. Nat’l City Bank, 592 F.3d 759, 763 (7th Cir. 2010)).
“ ‘[E]valuating the sufficiency of the complaint, we con-
strue it in the light most favorable to the nonmoving
party, accept well-pleaded facts as true, and draw
all inferences in her favor.’ ” Reynolds, 623 F.3d at 1146
(quoting Reger Dev. LLC, 592 F.3d at 763). We are not,
10 Nos. 10-2284 & 10-3046
however, bound to accept as true a legal conclusion
couched as a factual allegation. Bonte v. U.S. Bank, N.A., 624
F.3d 461, 465 (7th Cir. 2010).
“To survive a motion to dismiss, the plaintiff must
do more than simply recite elements of a claim; the ‘com-
plaint must contain sufficient factual matter, accepted
as true, to “state a claim to relief that is plausible on
its face.” ’ ” Reynolds, 623 F.3d at 1146 (citing Ashcroft v.
Iqbal, 129 S. Ct. 1937,1949 (2009)). “The plaintiff need not,
however, plead ‘detailed factual allegations.’ ” Reynolds,
623 F.3d at 1146 (citing Ashcroft, 219 S. Ct. at 1949).
III. P LAINTIFFS’ § 502(A)(3) C LAIM
The district court dismissed plaintiffs’ ERISA § 502(a)(3)
claim 7 for failure to state a claim for equitable relief
under ERISA, finding that plaintiffs were left with only
a claim for legal relief, that is, the enforcement of a con-
tractual obligation to pay money. Kolbe & Kolbe Health &
Welfare Benefit Plan v. Med. Coll. of Wis., Inc., 2009 U.S. Dist.
LEXIS 107427, at *6 (W.D. Wis. Nov. 17, 2009). We find
that while the district court was correct to dismiss plain-
tiffs’ claim under ERISA § 502(a)(3), we reach this con-
clusion on different grounds.
Section 502(a)(3) permits participants, beneficiaries,
and fiduciaries to bring a civil action “to obtain other
7
Throughout this opinion we refer to § 502(a)(3), the more
common practice, and the official cite, 29 U.S.C. § 1132(a)(3),
interchangeably.
Nos. 10-2284 & 10-3046 11
appropriate equitable relief . . . to redress [violations of the
plan] . . . or . . . to enforce . . . the terms of the plan.” 29
U.S.C. § 1132(a)(3). In other words, this section allows a
plan fiduciary, such as plaintiffs (subject to footnote 1,
regarding fiduciaries), to bring claims in equity to
enforce provisions of the plan, but not claims at law.
Throughout this litigation, plaintiffs have pointed to its
overpayment provision as the “term of the plan” it
sought to enforce. Id. But the overpayment provision’s
clear language demonstrates that it has nothing to do
with this litigation. The provision reserves for plaintiffs
“the right to recover any payments made by the Plan
that were: . . . [m]ade in error.” But it further specifies
that it reserves the “the right to recover against Covered
Persons if the Plan has paid them or any other party on
their behalf.” (Emphasis added). The Plan defines “Cov-
ered Person” as “an Employee or Dependent who are [sic]
enrolled under this Plan.”
Based on that language, plaintiffs have pled its
§ 502(a)(3) claim out of court. The premise of its alleg-
ation is that K.G. is not and never was a Covered Person.
Plaintiffs concede in its pleadings that its payments to
defendants were for services that were not rendered to
a Covered Person, “that is an eligible Employee or
eligible Dependent Child, under the terms of the Plan.”
Also, plaintiffs nowhere allege that K.G. was ever “en-
rolled” under the Plan, as that term appears to be used
in the definition of “Covered Persons.” Although we
find no definition of that term in the record, plaintiffs
own allegations indicate that K.G. was never “enrolled”.
It claims as the basis of its suit that K.G. was eventually
12 Nos. 10-2284 & 10-3046
denied coverage because her father never completed the
“Employee Enrollment/Change Form.”
Thus, there is no way for defendants, or even K.G., for
that matter, to have been a “Covered Person” for the
purposes of medical treatment K.G. received, and thus
for the payments allegedly “made in error.” Accordingly,
the “term” of the Plan that plaintiffs allegedly seek
to “enforce” through § 502(a)(3) has nothing to do with
this suit. That repayment provision applies to “Covered
Persons,” not to individuals it claims were never
Covered Persons and not to third parties who provided
medical services to individuals who were never Covered
Persons. In other words, plaintiffs are seeking equitable
relief to enforce a term of its Plan that by its own allega-
tions was never violated and cannot be enforced with
regard to the medical treatment K.G. received. For the
purposes of K.G.’s medical procedures, no “Covered
Person” declined to reimburse the Plan for payments
the Plan “made in error,” and there is not, nor has there
ever been, a Covered Person to whom the overpayment
provision could apply in this case. Thus, this is not a
suit “to enforce . . . the terms of the plan” under ERISA
§ 502(a)(3), and, more generally, ERISA has nothing to
do with this case. This case involves an ERISA plan
that paid medical providers for medical services they
provided to an individual who is not and never was
covered under the ERISA plan. 29 U.S.C. § 1132(a)(3).
We affirm the district court’s dismissal of plaintiffs’
claim under § 502(a)(3).
Nos. 10-2284 & 10-3046 13
IV. P LAINTIFFS’ F EDERAL C OMMON C LAIM FOR
U NJUST E NRICHMENT
Plaintiffs contend that they have also alleged unjust
enrichment under the federal common law of ERISA in
three ways: (1) as an ERISA fiduciary, (2) as an employer,
and (3) as an ERISA plan. Defendants contest this, arguing
that “[p]laintiffs cannot obtain relief through a common
law action for unjust enrichment under ERISA because
ERISA § 502(a)(3) specifically forecloses their action
for equitable relief.” Because we find that neither ERISA
nor the Plan at issue was violated, however, there is no
gap involving ERISA and this suit involves claims that
are beyond ERISA’s reach. See N. Am. Coal Corp. Ret. Sav.
Plan v. Roth, 395 F.3d 916, 917 (8th Cir. 2005) (“[B]ecause
there is no gap in ERISA’s text regarding a fiduciary’s
right to bring a civil action for legal remedies to enforce
plan terms or ERISA provisions, a federal common law
remedy cannot be recognized.”).
“It is true that, in interpreting the provisions of ERISA,
federal courts are charged with the responsibility of
fashioning a federal common law ‘ ”to deal with issues
involving rights and obligations under private welfare
and pension plans.” ’ ” Buckley Dement, Inc. v. Travelers
Plan Adm’rs. of Ill., Inc., 39 F.3d 784, 789 (7th Cir. 1994)
(quoting Franchise Tax Bd. v. Constr. Laborers Vacation
Trust, 463 U.S. 1, 24 n. 26 (1983)). Nevertheless, the Su-
preme Court has “observed repeatedly that ERISA is a
‘ ”comprehensive and reticulated statute,” the product of
a decade of congressional study of the Nation’s private
employee benefit system.’ ” Great-West Life & Annuity
14 Nos. 10-2284 & 10-3046
Ins. Co. v. Knudson, 534 U.S. 204, 209 (2002) (quoting
Mertens v. Hewitt Assocs., 508 U.S. 248, 251 (1993)). The
Court has “therefore been especially ‘reluctant to
tamper with [the] enforcement scheme’ embodied in the
statute by extending remedies not specifically authorized
by its text.” Knudson, 534 U.S. at 209 (quoting Mass. Mut.
Life Ins. Co. v. Russell, 473 U.S. 134, 147 (1985)). Indeed
“ERISA’s ‘carefully crafted and detailed enforcement
scheme provides “strong evidence that Congress did not
intend to authorize other remedies that it simply forgot
to incorporate expressly.” ’ ” Knudson, 534 U.S. at 209
(quoting, Mertens, 508 U.S. at 254).
Here, because the rights and obligations under the
Plan are not at issue, i.e., there is no dispute that K.G. was
not a Covered Person under the Plan, there is no need
to interpret the provisions of ERISA and develop
federal common law under ERISA. Accordingly, the
district court’s dismissal of plaintiffs’ federal common
law claim for unjust enrichment is affirmed.
IV. P LAINTIFFS’ S TATE L AW C LAIMS
Plaintiffs also alleged two state law breach of contract
actions against defendants based upon agreements de-
fendants made with third-party network providers, i.e.,
NCHA and Bowers. Plaintiffs argue that they are third-
party beneficiaries of those agreements and should be
able to sue to enforce those agreements because “[b]y
requesting payment from the Plan and retaining any
payments received from the Plan,” defendants have
breached those agreements. More specifically, plaintiffs
Nos. 10-2284 & 10-3046 15
contend that under the provider agreements, defendants
agreed to provide “Covered Services” to “Beneficiaries,”
and that “Covered Services” are “those medical services
covered under a Plan, subject to any limitations on such
coverage as may be contained in such Plan.” Plaintiffs
contend that since K.G. was not covered under the Plan
defendants have breached the provider agreements by
retaining payments for a person not covered under the
Plan.
“A district court’s preemption ruling is a question of law
that we review de novo.” Trs. of the Aftra Health Fund v.
Biondi, 303 F.3d 765, 772 (7th Cir. 2002) (citing, e.g., Moran
v. Rush Prudential HMO, Inc., 230 F.3d 959, 966 (7th Cir.
2000)). Section 514(a) states that ERISA preempts “any
and all State laws insofar as they may now or hereafter
relate to any employee benefit plan” covered under
ERISA. 29 U.S.C. § 1144. “The question whether a certain
state action is preempted by federal law is one of congres-
sional intent.” Ingersoll-Rand Co. v. McClendon, 498 U.S. 133,
137-38 (1990). “The key to § 514(a) is found in the words
‘relate to.’ ” Id. at 138. A law “relates to” an employee
benefit plan if it has a connection with or reference to
such a plan. Id. at 139. “ERISA thus preempts a state
law claim if the claim requires the court to interpret or
apply the terms of an employee benefit plan . . . .” Collins
v. Ralston Purina Co., 147 F.3d 592, 595 (7th Cir. 1998).
Still, “[a] state-law claim is not expressly preempted
under § 1144(a) merely because it requires a cursory
examination of ERISA plan provisions.” Biondi, 303 F.3d
at 780 (citing, e.g., Coyne & Delany Co. v. Selman, 98
F.3d 1457, 1472 (4th Cir. 1996)).
16 Nos. 10-2284 & 10-3046
Since this case does not require interpreting or
applying the Plan, nor does it relate to the Plan in any
significant way, plaintiffs’ state law claims are not pre-
empted. See Biondi, 303 F.3d at 780 (“While we have
held that ERISA preempts a state law claim if the claim
requires the court to interpret or apply the terms of an
employee benefit plan, the Trustees’ common law fraud
claim does not require us to interpret or apply any of
the Plan’s provisions.” (internal quotation marks and
citations omitted)). Here, plaintiffs’ pleadings make
it unnecessary to review the Plan to resolve its breach of
contract claims. In order to resolve those claims, a court
would need to interpret only the member or service
agreements and the provider agreements, since it is
undisputed that the information required to enroll K.G.
in the Plan—i.e., for her to qualify as a Covered Per-
son—was never submitted properly, and thus that she
was never a Covered Person. Furthermore, we engage
the broader analytical framework for determining
whether state law claims are preempted under ERISA as
discussed in Biondi, though we find no need to
replicate that historical reference here. We conclude that
plaintiffs’ state law breach of contract action is an area
of traditional state regulation that contains allegations
which seek to satisfy the statutory objectives of ERISA
and is not an alternative enforcement mechanism of
ERISA. See Biondi, 303 F.3d at 773-82. As a consequence,
we conclude that plaintiffs’ state law claim is not pre-
empted. Thus, the district court’s dismissal of plaintiffs’
state law claims is reversed and remanded to the
district court.
Nos. 10-2284 & 10-3046 17
On remand, the district court has discretion whether
to exercise supplemental jurisdiction over plaintiffs’ state
law claims. See Carlsbad Tech., Inc. v. HIF BIO, Inc., 129
S. Ct. 1862, 1866 (2009); 28 U.S.C. § 1367(c) (“The
district courts may decline to exercise supplemental
jurisdiction over a claim . . . if . . . the district court has
dismissed all claims over which it has original jurisdic-
tion . . . .”). Nonetheless, it is well-established that the
usual practice is to dismiss the state supplemental claims
without prejudice. See Groce v. Eli Lilly & Co., 193 F.3d
496, 501 (7th Cir. 1999) (“[I]t is the well-established law
of this circuit that the usual practice is to dismiss
without prejudice state supplemental claims whenever
all federal claims have been dismissed prior to trial.”);
Rothman v. Emory Univ., 123 F.3d 446, 454 (7th Cir. 1997)
(“Ordinarily, a federal court relinquishes jurisdiction of a
pendent state-law claim when the federal claims are
dismissed before trial.”).
VI. A TTORNEY F EES AND C OSTS
Plaintiffs also appeal the district court’s award of attor-
ney fees in favor of defendants in this case. ERISA allows
a court, in its discretion, to award “a reasonable attor-
ney fee and costs of action to either party.” 29 U.S.C.
§ 1132(g)(1). We review such an award for an abuse
of discretion. Fritcher v. Health Care Serv. Corp., 301 F.3d
811, 818 (7th Cir. 2002) (citing Trustmark Life Ins. Co.
v. Univ. of Chi. Hosps., 207 F.3d 876, 884 (2000)).
“[A] fee claimant need not be a ‘prevailing party’ to be
eligible for an attorney’s fees award under § 1132(g)(1).”
18 Nos. 10-2284 & 10-3046
Hardt v. Reliance Standard Life Ins. Co., 130 S. Ct. 2149, 2156
(2010). Rather, “a fees claimant must show ‘some degree
of success on the merits’ before a court may award at-
torney’s fees under § 1132(g)(1).” Id. at 2158 (quoting
Ruckelshaus v. Sierra Club, 463 U.S. 680, 694 (1983)). Once a
party has shown “some success on the merits,” that party
becomes eligible for attorney fees under § 1132(g)(1).
Hardt, 130 S. Ct. at 2159. “Accordingly, after concluding
that party has shown ‘some degree of success on the
merits’ and is thus eligible for fees, courts must determine
whether fees are appropriate.” Pakovich v. Verizon Ltd.
Plan, Nos. 10-1889 & 10-3083, 2011 U.S. App. LEXIS 15014,
at *14-15 (7th Cir. July 22, 2011) (citing Huss v. IBM Med. &
Dental Plan, Nos. 1061 & 10-2749, 2011 U.S. App. LEXIS
7563, at *34 (7th Cir. April 13, 2011)).
This circuit has recognized two tests for analyzing
whether attorney fees should be awarded to a party in
an ERISA case. See Fritcher, 301 F.3d at 819 (citing to
Quinn v. Blue Cross & Blue Shield Ass’n, 161 F.3d 472, 478
(7th Cir. 1998)); Lowe v. McGraw-Hill Cos., 361 F.3d 335,
339 (7th Cir. 2004). “The first test looks at the fol-
lowing five factors: 1) the degree of the offending par-
ties’ 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 (citing Flipowiscz v.
Am. Stores Benefit Plans Comm., 56 F.3d 807, 816 (7th Cir.
Nos. 10-2284 & 10-3046 19
1995)). “The second test looks to whether or not the
losing party’s position was ‘substantially justified.’ ” Quinn,
161 F.3d at 478 (citing Bittner v. Sadoff & Rudoy Indus., 728
F.2d 820, 830 (7th Cir. 1984)). “In any event, both tests
essentially ask the same 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 478 (quoting Hooper v. Demco, Inc., 37
F.3d 287, 294 (7th Cir. 1994)); see also Huss, 2011 U.S.
App. LEXIS 7563, at *35 (“A five-factor test may inform
the court’s analysis, see, e.g., Quinn, 161 F.3d at 478, but
‘the factors in the test are used to structure or imple-
ment, rather than to contradict, the “substantially justi-
fied” standard . . . as the “bottom-line” question to be
answered.’ ”) (quoting Lowe, 361 F.3d at 339). “In deter-
mining whether the losing party’s position was ‘substan-
tially justified,’ the Supreme Court has stated that a
party’s position is ‘justified to a degree that could satisfy
a reasonable person.’ ” Trustmark, 207 F.3d at 884 (quoting
Pierce v. Underwood, 487 U.S. 552, 565 (1988)).
Here, defendants met their initial burden of estab-
lishing “some degree of success on the merits,” as we are
affirming the dismissal, although on different grounds, of
two of plaintiffs’ claims against them. Nonetheless, we
must also determine plaintiffs’ litigation position was
substantially justified and taken in good faith or whether
they were out to harass defendants. See Huss, 2011 U.S.
App. LEXIS 7563, at *35 (citing Herman v. Cent. States, Se. &
Sw. Areas Pension Fund, 423 F.3d 684, 696 (7th Cir. 2005)).
In this case, the district court found “that a closer look
at the applicable law would have alerted plaintiffs’
20 Nos. 10-2284 & 10-3046
counsel to the lack of merit of most of their arguments”
and found “an element of ‘shabbiness’ about plaintiffs’
conduct.” Kolbe & Kolbe Health & Welfare Benefit Plan v.
Medical Coll. of Wis., Inc., No. 09-cv-205-bbc, 2010 U.S.
Dist. LEXIS 60904, at *5 (W.D. Wis. June 18, 2010). More
specifically, the court found that plaintiffs’ claim under
§ 502(a)(3) “was clearly without merit,” id. at *6, and
also concluded that plaintiffs were not substantially
justified in bringing their state common law claims, id.
at *12. The district court, however, did find that plain-
tiffs had substantial justification to bring its claim for
federal common law unjust enrichment. Id. at *10. In
reaching these conclusions, the district court looked to
both of the tests mentioned above, and ultimately
ordered plaintiffs to pay $62,149.93 for work done in
the defense of plaintiffs’ § 502(a)(3) and state law claims.
We find that this was an abuse of the district court’s
discretion.
Here, we find that plaintiffs’ litigation position in
bringing all of their claims was substantially justified and
taken in good faith without the purpose of harassing
defendants. In fact, the district court noted that it would
be hard-pressed to characterize plaintiffs’ claims as
“harassment” in this case. That, coupled with the fact
that we find that plaintiffs’ litigation position was
certainly not unreasonable, leads us to conclude that
the district court abused its discretion in awarding at-
torney fees in this case. Accordingly, the district court’s
award of attorney fees is reversed.
Nos. 10-2284 & 10-3046 21
VII. C ONCLUSION
For the reasons stated above, we affirm the district
court’s dismissal of plaintiffs’ ERISA § 502(a)(3) and
common law unjust enrichment claim under ERISA, albeit
on different grounds. We reverse the district court’s
dismissal of plaintiffs’ state law claims and remand to
the district court with instructions to use its discretion
as whether to exercise supplemental jurisdiction over
plaintiffs’ state law claims or to dismiss them without
prejudice. The district court’s award of attorney fees
is reversed.
A FFIRMED IN P ART,
R EVERSED IN P ART, AND R EMANDED.
9-2-11