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A federal judge has awarded more than $240,000 in attorney fees to a pair of lawyers whose $800,000 victory for their sole client in a pension benefits dispute with CIGNA Corp. directly led to increased benefits for another 178 workers. In his 14-page opinion in Depenbrock v. CIGNA Corp., Senior U.S. District Judge Robert F. Kelly found that under the 3rd U.S. Circuit Court of Appeals’ test for awarding discretionary fees under ERISA, all five factors weighed in favor of an award of fees to the plaintiff. Kelly had originally ruled in CIGNA’s favor and dismissed John Depenbrock’s claim on summary judgment. But Depenbrock won a complete reversal on appeal when the 3rd Circuit ruled that the reduction of his benefits was illegal, and that the “doctrine of ratification” cannot be used to justify retroactive application of a change to a pension plan if it would have the effect of reducing a worker’s accrued benefits. At issue in the litigation was whether Depenbrock was entitled to the more generous pension plan offered by CIGNA until 1998 after he left the company for 11 months and was rehired. CIGNA argued that although long-term employees were grandfathered in under the higher benefits plan, the new, more modest plan included a “rehire rule” that said long-term employees who left and came back would do so under the new plan. But the 3rd Circuit found that because the rehire rule was not officially adopted until December 1998 — several weeks after Depenbrock returned — it did not apply to him. The appellate court also found that the rehire rule could not be retroactively ratified because such a ratification “would effect a retroactive reduction of Depenbrock’s accrued benefits under the old plan.” As a direct result of Depenbrock’s victory, CIGNA recently announced that it had returned 178 rehired employees to the old plan. In their fee petition, Depenbrock’s lawyers — Stephen R. Bruce of Washington, D.C., and William M. O’Connell III of Barbin & O’Connell in Rockledge, Pa. — asked for more than $245,000 in fees and costs for their work at both the district court and appellate levels. Kelly found that while the Employee Retirement Income Security Act merely says that an award of fees is within the trial judge’s discretion, the 3rd Circuit has established a five-factor test. In its 1994 decision in McPherson v. Employees’ Pension Plan of American Re-Insurance Co., the court instructed trial judges to consider: � The offending parties’ culpability or bad faith, � The ability of the offending parties to satisfy an award of attorney fees, � The deterrent effect of an award of attorney fees against the offending parties, � The benefit conferred on members of the pension plan as a whole, and � The relative merits of the parties’ position. Kelly found that all five factors weighed in favor of a fee award to Depenbrock. Looking to the first factor, Kelly found that McPherson instructs that the defendant need not be found to have engaged in “bad faith,” but need only be deemed “culpable” for the factor to weigh in the plaintiff’s favor. “While bad faith connotes an ulterior motive, a party may be culpable without having acted with such an ulterior motive,” Kelly wrote. CIGNA’s actions, Kelly found, “rise to the level of culpability” because it “relied upon unsubstantiated interpretations of the applicable law.” Defense attorneys Joseph J. Costello and Tamsin J. Newman of Morgan Lewis & Bockius urged Kelly to award no fees at all, arguing that Kelly’s decision in CIGNA’s favor in the first round of the litigation proved that CIGNA could not be considered culpable. Depenbrock’s lawyers, they argued, “ignore the crucial fact that this court agreed with defendants’ position and granted them summary judgment … . This fact wholly undercuts Depenbrock’s assertion that defendants engaged in ‘censurable’ and ‘blamable’ conduct.” But Kelly refused to consider his own July 2003 rulings, saying “I must view this case through the prism of the 3rd Circuit’s reasoning and decision rather than my own.” The 3rd Circuit, Kelly noted, found that CIGNA’s CEO had the authority to amend the plan and adopt the rehire rule, and did not do so until Dec. 21, 1998. CIGNA’s central argument in the appeal — that the amendment to the pension plan did not reduce Depenbrock’s accrued benefits — was rejected by the 3rd Circuit, which held that the argument was “premised on an unsubstantiated interpretation of ERISA’s anti-cutback rule.” Kelly found that CIGNA’s retroactive ratification argument was also rejected by the 3rd Circuit. On the third McPherson factor, Kelly found that an award of fees would have a deterrent effect because “it will deter the defendants from attempting to retroactively reduce benefits that have been accrued as well as act contrary to the amendment procedures.” On the fourth factor, CIGNA’s lawyers argued that it weighed in their favor since Depenbrock’s victory benefited only 178 of the 25,000 workers in the pension plan. Kelly disagreed, finding that a benefit need not be conferred on the entire group for the fourth factor to weigh in the plaintiff’s favor. By benefiting 178 other workers, he said, Depenbrock’s case qualified. Turning to the reasonableness of the fees requested, Kelly rejected CIGNA’s argument that Depenbrock was entitled only to a partial fee since he won on only one of his five claims. “Plaintiff has obtained excellent results so as to allow him to recover a full fee. In fact, because plaintiff’s result under Count I was so excellent, the 3rd Circuit deemed it unnecessary to even reach the remaining claims,” Kelly wrote. “Thus, the 3rd Circuit’s decision in choosing not to discuss plaintiff’s other claims does not lead to the conclusion that plaintiff’s fees should be reduced, particularly where plaintiff has received such excellent results,” Kelly wrote. The defense lawyers also argued that all of O’Connell’s fees should be excluded because his work on the case was duplicative of Bruce’s work. Kelly flatly rejected that argument, saying he found it “extraordinary” since the defense team had filed its own fee petition after the district court victory that asked for more in fees for work on the first round of the litigation than the plaintiff’s team had requested for work on the entire case. “While defendants allege that they incurred approximately $250,000 in fees and costs at the district court level, plaintiff has requested a total award of $170,203.81 for work and expenses incurred before this court, and $75,494.95 for work and expenses incurred before the 3rd Circuit on appeal. This totals $245,698.76. Thus, plaintiff’s total request, including his fees and costs incurred on appeal, is less than the amount that the defendants sought for work completed just at the district court level,” Kelly wrote. Kelly concluded that O’Connell’s fees “were not merely duplicative of Bruce’s fees,” and that the record showed that O’Connell and Bruce “worked together and collaboratively.” But CIGNA’s lawyers won one of their arguments when Kelly agreed to trim about $3,400 from Bruce’s fees for time he spent investigating other rehired employees. “While the decision in this case has the potential to effect other rehired employees during the relevant period, I will not allow plaintiff’s counsel to receive a fee award for other potential plaintiffs when this case was not a class action,” Kelly wrote.

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