Opinion
99 Civ. 0671 (SAS) (AJP)
March 8, 2001.
REPORT AND RECOMMENDATION
To the Honorable Shira A. Scheindlin, United States District Judge:
Plaintiffs brought this class action on January 29, 1999, pursuant to the Employee Retirement Income Security Act ("ERISA"), challenging a resolution adopted by the defendant New York City District Council of Carpenters Welfare Fund (the "Fund") in November 1998, effective January 1, 1999, requiring retired participants to pay monthly premiums for health insurance which previously was free. By July 1, 2000, free health insurance coverage had been restored to all retirees.
Presently before the Court is plaintiffs' application for attorneys' fees, arguing that their suit was a catalyst for the Fund's reinstatement of free medical insurance coverage. (Dkt. Nos. 65-66, 73-74.) The Fund opposes plaintiffs' attorneys' fee motion and cross-moves for attorneys' fees for opposing plaintiffs' fee application. (Dkt. Nos. 67-70.) For the reasons set forth below, the Court should award attorneys' fees to plaintiffs.
The parties have agreed that should the Court decide that plaintiffs are entitled to an award of attorneys' fees, both sides will "attempt to agree upon the amount of fees to be awarded, submitting any dispute about that question to the Court only should resolution prove impossible." (Dkt. No. 65: Pls. Motion for Attorneys' Fees at 1 n. 1)
FACTS
The PartiesThe Parties Plaintiffs are retiree-participants in the New York City District Council of Carpenters Health and Welfare Plan (the "Plan").Lynch v. New York City District Council of Carpenters Welfare Fund, 99 Civ. 0671, 1999 WL 177436 at *1 (S.D.N.Y. Mar. 30, 1999) (Cote, D.J.) (opinion denying plaintiffs' motion for a preliminary injunction). The Plan is both a "multiemployer plan" and an "employee welfare benefit plan" within the meaning of ERISA. Id., 1999 WL 177436 at *1. The Plan is sponsored by the New York City District Council of Carpenters Welfare Fund (the "Fund"). Id. The Fund is a trust fund administered in accordance with an Agreement and Declaration of Trust under Section 302 of the Labor Management Relations Act ("LMRA"), 29 U.S.C. § 186. Lynch v. New York City District Council, 1999 WL 177436 at*1. The Fund is sponsored by a Board of Trustees (the "Board" or the "Trustees"), half union designated and half employer designated. Id. Zenith Administrators, Inc. ("Zenith") is the Plan's third party administrator. Id. William M. Mercer, Inc. ("Mercer") is a benefit consultant to the Fund, and Dr. Morris Snow was the key Mercer employee involved in the Fund's actions at issue in this case. Id., 1999 WL 177436 at *2, *5 n. 2.
The November 1998 Resolution and the December 15, 1998 and January 18, 1999 Notices
In November 1998, the Fund decided that effective January 1, 1999, retired Plan participants who previously received health benefits at no cost, would have to pay 37.5% of the premium for persons under age 65 and 18.75% of the premium for persons over age 65, or lose their health insurance. (See Ex. 23: Board Resolution.) See Lynch v. New York City District Council, 1999 WL 177436 at *1. The Plan had about 8000 retired participants (including 1000 disabled pensioners), three fourths over age 65. (Ex. O: Patterson Dep. at 70-71; Ex. O: Grabois Dep. at 16-17.) In October 1998, Mercer had projected that implementation of these retiree contributions would save the Fund $24 million annually. (See Ex. C: 10/1/98 Board Minutes at IX; Ex. T, Ex. 19: 12/15/99 Snow Reply Aff. ¶ 1.) Mercer did not specify what proportion of the savings would come from premium collections versus retirees dropping insurance coverage. (Snow Reply Aff. ¶ 3.) Although the issue had not been raised in discussions with the Board (see, e.g., Ex. O, Ex. 2: Brossman Dep. at 51-52), in making its calculations, Mercer assumed that disabled pensioners would be subject to the co-payment requirement (see,e.g., Ex. K, Ex. 22: 2/17/00 Plan Design Comm. Minutes at 2).
Unless otherwise specified, lettered exhibits are attached to the 7/24/00 Affidavit of plaintiffs' attorney Seth Kupferberg and numbered exhibits are attached to the 8/31/00 Supplemental Affidavit of Fund attorney Scott A. Gold.
The terms "disabled retirees" and "disabled pensioners" are used interchangeably.
On December 15, 1998, the Fund mailed a Notice to all Plan members, both active and retired, informing them of the new retiree contribution requirements. (Dkt. No: 4:2/5/99 Newton Aff. Ex. B: 12/15/98 Notice.) The "Retiree Contributions" section of the Notice reads as follows:
"Effective January 1, 1999, all retired members who elect to receive coverage under the Health and Welfare Fund will pay a portion of the cost of the plan.
"For retirees under the age of 65, the contribution will be 37.5% of the total cost. For retirees age 65 and older, the contribution will be 18.75% of the total cost.
"If you would like to continue your health coverage, you must sign the attached authorization form permitting the plan administrator to deduct the cost of coverage, as shown, from your pension check. As an alternative, you can elect to be billed directly on a quarterly basis. If you decide you no longer want coverage, you can notify the administrator in writing. However, once you terminate your coverage, you cannot rejoin the plan at a later date."Lynch v. New York City District Council, 1999 WL 177436 at *1 (quoting 12/15/98 Notice, emphasis in original). Materials accompanying the December 15 Notice instructed retirees wishing continued coverage to return an authorization by January 15, 1999 for deduction of premiums from pensions payments, or an election to make direct payments, together with a first quarterly payment, by January 31, 1999. (2/5/99 Newton Aff. Exs. A, C.) That material also informed retirees that the monthly cost would be $90 for single coverage or $180 for family coverage for retirees under age 65, and $45 for single coverage or $90 for family coverage for retirees over age 65. (2/5/99 Newton Aff. Ex. C.) See also, Lynch v. New York City District Council, 1999 WL 177436 at *2.
A second notice was sent on January 18, 1999 to those retirees whose election forms had not yet been received, stating that: "You must complete and return the enclosed election form along with your payment for the first quarter . . . by January 31, 1999, in order for your coverage to be continued." (2/5/99 Newton Aff. Ex. D: 1/18/99 Notice.)
Confusion as to Whether the Co-payment Requirement Applied to Disabled Pensioners
Neither the November 1998 resolution nor the December 1998 — January 1999 notices specified whether the co-payment requirement would apply to disabled retirees (see Ex. 23: Resolution; Dkt. No: 4:2/5/99 Newton Aff. Exs. A-D: 12/15/98 1/18/99 Notices),, and it is undisputed that prior to adopting the Resolution the Trustees had not discussed whether disabled retirees would be required to contribute to the cost of their health coverage. (See, e.g., Ex. O, Ex. 2: Brossman Dep. at 49-50; Ex. 8: Greco Dep. at 63-64; Dkt. No. 67:8/31/00 3d Supp. Grabois Aff. ¶ 5.)
Disability pensioners who called Zenith's and the Fund's offices in response to the Notices received conflicting information as to whether or not they would be required to contribute to the cost of their health coverage. (See Ex. Q: 1/27/99 Lynch Aff. ¶ 11-12). James Lynch, a disability retiree and one of the original plaintiffs, alleged that when he "telephoned the Benefit Funds' New York office in early January 1999 to request clarification," he was told that "it was uncertain whether the announcement applied to disability retirees" but was advised to "return the Medical Election Form without making a payment election." (Id. ¶ 12.) He further alleged that prior to commencement of this lawsuit, he and other plaintiffs met with Fund Director Stuart Grabois and other Fund employees who told them that "they were not certain whether or not payments to continue health coverage would be required of disability retirees." (Id. ¶ 13.)
Nonetheless, Fund Director Grabois alleged that "[i]t was my opinion and the opinion of my staff that the amendments did not apply to disabled pensioners on waiver because such individuals historically have been viewed as 'active' members rather than retirees." (8/31/00 3d Supp. Grabois Aff. ¶ 3.) Grabois further alleged that:
At the end of December and beginning of January [1999], I questioned at least one Management Trustee and at least one Union Trustee about this issue and it was agreed at this time — and before the litigation had began — that the co-payment did not apply to all disabled pensioners unless the full Board of Trustees formally voted to apply the co-payment to that group.
(Id. ¶ 6.) In addition, Tim Newton, Zenith's Vice President, alleged that:
After the initial notices were sent on December 15, 1998 an issue arose concerning the applicability of the benefit changes to disability retiree members who receive health benefits and were eligible for a disability waiver. The Welfare Fund immediately determined, within one week after the question arose, that this group of disability retiree members historically have been treated by the Funds as active rather than retiree members. Therefore, it was determined that the benefit changes would not apply to this group of disability retirees. The Funds' staff advised these disability retirees that they would not have to pay the co-payment.
(Ex. S, Ex. 10:2/5/99 Newton Aff. ¶ 16.)
Mark Brossman, the Fund's counsel, testified with respect to the confusion surrounding the applicability of the co-payment requirement to disability pensioners as follows:
. . . . My recollection is that [sometime after December 15, 1998] Mercer called because they had conversations with the fund office and perhaps with Zenith about the applicability to the disability retirees.
Mercer took the position that the amendments were applicable, and . . . [t]he fund office took the opposite position, that they did not have to pay premiums.
My best recollection is that Mercer called me and I expressed unhappiness with Mercer for failing to have raised this issue during the myriad conversations that we had about these benefit changes.
Q: No one else had raised it either, correct?
A: It never, to the best of my recollection, came up as a specific sort of group that should be addressed separately.
So Mercer was interpreting the amendment to require disabled pensioners to pay a premium basically because there was never a discussion to exclude them.
I took issue with that approach because I knew that the trustees would be very upset that a group would be included that there had been no specific discussion about and that the trustees would certainly want the opportunity to consider the impact on the specific group.
The fund office, as I said, took the position that this group was not to pay benefits, contributions for their benefits, because, one, it hadn't been raised, and two, . . . they took the position that they had been treated as active rather than as retired members.. . .
I endorsed the view that, unless the trustees specifically included them, they should not be included, and it was my view that the trustees had not specifically included them. I didn't think they should be included by default, because Mercer failed to raise the issue.
Q: Did you yourself poll or discuss the issue with any of the trustees in December 1998 or January 1999?
A: The answer is that I am sure I did, but I don't have an independent recollection at this time.
. . . .
I don't even know if I was around during that time period. It is around Christmas of '98. I would have to really determine where I was, but I am very clear that I spoke with Mercer. I spoke to the fund office. I may have spoken to Zenith. I certainly may have talked to trustees on the issue, but I am 100 percent clear that I directed Mercer and the fund office to talk to the trustees to get a resolution of the issue.
. . . .
Q: Which trustees were needed — how many trustees, in your view, did Mercer or Zenith need to talk to in order to obtain an interpretation?
A: . . . . My view was that if it was to be covered, the trustees would have to specifically cover it. If the trustees were going to specifically make that decision, it would have to be all the trustees. . . .
Q: Other than what is stated in Mr. Newton's affidavit, do you have any knowledge of when this issue was resolved?
A: My recollection is a decision was made at that time not to include the disability retirees.
Q: At that time, what time are you speaking of?
A: Prior to January 1, that they would not be included in the notices, et cetera.
(Ex. O, Ex. 2: Brossman Dep. at 49-54, emphasis added.)
Defense counsel Ronald Richman, however, testified that, as of January 29, 1999 — when he appeared at a hearing before Judge Cote in this action — he "thought [disability pensioners] were not required to pay contributions" for health insurance, but that he was "not certain" this was the case until approximately February 1999. (Ex. O: Richman Dep. at 7-9.)
Commencement of this Lawsuit, the January 29, 1999 TRO Hearing and the February 4, 1999 Notice
On January 29, 1999, plaintiffs filed this action, alleging that the Trustees' imposition of premiums on retirees but not active employees was "without any reasonable basis, arbitrary and capricious, and in violation of the terms of the plan." (Dkt. No. 1: Compl. ¶ 19.) Plaintiffs requested an order enjoining enforcement of the December 15, 1998 notice, and a preliminary and permanent injunction continuing free coverage for retired Fund participants and restoring coverage to anyone terminated for nonpayment, as well as damages. (Id. at 8-9, Wherefore clause.) In addition, plaintiffs sought a temporary restraining order against termination of coverage for non- payment of premiums, then due by January 31, 1999. See Lynch v. New York City District Council, 1999 WL 177436 at *2.
On the same day plaintiffs filed the complaint, Judge Cote held a conference with both sides and declined to enter a TRO. See id. "In deciding whether to enter the TRO, the Court expressed its concern regarding the adequacy of the notice given to retirees," and the Fund's counsel represented that the January 31, 1999 deadline would not be enforced. Id., 1999 WL 177436 at *2 n. 1.
Fund Director Grabois alleges that prior to the January 29, 1999 TRO hearing, there had already been a determination that retirees would not be held to the January 31 deadline:
I spoke with numerous individuals, including Trustees and Fund counsel, in late December 1998 and the beginning of January 1999 about the [issue of providing appropriate notice to retirees]. We agreed at that time — and before this litigation began — that the Fund would be flexible about the January 31, 1999 deadline and that Zenith would not immediately discontinue the health insurance coverage on January 31, 1999 for retirees who had not completed and returned their Election Forms by then. Rather, Zenith would send reminder notices to all retirees who had not returned their Election Forms by the January 31, 1999 deadline and would provide such retirees additional time to return their Election Forms. We did not publish the intention to be flexible about the January 31, 1999 deadline out of concern that such information might delay responses from retirees who were in a position to respond by January 31, 1999.
(Dkt. No. 67:8/31/00 3d Supp. Grabois Aff. ¶ 8; see also Ex. O, Ex. 2: Brossman Dep. at 35-36.) Fund counsel Richman testified that he "felt very comfortable" telling Judge Cote that the deadline would be extended "because it was not something that was a problem for my client and that is because it had been under discussion and I think it was received favorably." (See Ex. O, Ex. 9: Richman Dep. at 28.)
On February 4, 1999, the Fund mailed a third notice announcing that the medical coverage election deadline would be extended to February 28, 1999 and making clear, for the first time, that disability pensioners under age 65 were excluded from the co-payment requirement. (Dkt. No. 4:2/5/99 Newton Aff. Ex. E: 2/4/00 Notice.)
The Union Response to the Amendments and the Restoration of Free Coverage to Certain Retirees Over Age 65
Plaintiffs were not alone in protesting the benefit changes. Zenith, the Trustees, the Fund office and the Department of Labor received numerous phone calls and letters expressing concern about the changes. (Ex. O, Ex. 2: Brossman Dep. at 18-19.) Grabois testified that when he and other Fund officials visited the various union locals to explain the retiree contributions, they "caught hell." (Ex. 11: Grabois Dep. at 35.) Fund officials "were grateful to get out alive" after union meetings because "[t]here were a lot of outraged members . . . They were vehemently, vociferously and violently opposed" to the retiree contributions. (Ex. 7: Patterson Dep. at 39-40.) Brossman testified that while "the trustees realized when they made the amendments that they weren't all going to be popular," he thought that "the trustees, in particular the union trustees were surprised by the extent of vehemence of unhappiness about the benefit changes." (Ex. O, Ex. 2: Brossman Dep. at 18.)
Pursuant to the union's collective bargaining agreements, the union has the power to unilaterally allocate contributions to different benefit funds. (Ex. 3: O'Brien Dep. at 67; Ex. O, Ex. 2: Brossman Dep. at 28; Ex. 14: 11/10/99 Meberg Aff. ¶¶ 2, 4; Ex. 16:11/11/99 Supp. Grabois Aff. ¶ 4.) Subsequent to the November 1998 Resolution, the Fund's union trustees informed the Board that the union might be willing to allocate certain additional employer contributions due under the collective bargaining agreement to pay for restoration of some benefits. (Ex. 16:11/11/99 Supp. Grabois Aff. ¶ 5; 11/10/99 Meberg Aff. ¶ 2.)
On March 23, 1999, at their first meeting after the imposition of the co-payment requirement (see, e.g., Ex. O, Ex. 5: Johansen Dep. at 117; Ex. 8: Greco Dep. at 64), the Trustees directed Mercer to estimate the cost of restoring free coverage for retirees over age 65 with more than thirty years of pension credits. (Ex. D: 3/23/99 Board Minutes at VII; Ex. 16:11/11/99 Supp. Grabois Aff. ¶ 6.) Under the heading "Report of Co-Counsel," the March 23, 1999 Minutes state:
Mr. Brossman noted that he had distributed to the Trustees information concerning a purported class action filed against them in federal court seeking to enjoin implementation of the amendments requiring retiree co-payments. He noted that the Court denied the motion for a temporary restraining notice but that the motion for a preliminary injunction was pending. Extensive briefs, affidavits and exhibits had been submitted responding to the plaintiffs' claims of fiduciary breach, etc. Mr. Brossman noted that he had sent copies of the legal materials to the U.S. Department of Labor. Further he reported that he had instructed Sedgwick of Oregon to notify the fiduciary insurance carrier.
(3/23/99 Board Minutes at VIII.)
On March 29, 1999, Judge Cote denied plaintiffs' request for a preliminary injunction: she found that plaintiffs had shown irreparable injury but had not established a likelihood of "showing at trial that the defendants lacked substantial evidence to support their decision [to impose a co-payment requirement] or that the decision was otherwise arbitrary and capricious." Lynch v. New York City District Council, 1999 WL 177436 at *5; see also id. at *2, *7-9. Brossman reported on this at the May 11, 1999 Board meeting. (Ex. E, Ex. 28:5/11/99 Board Minutes at 3.)
On or about June 1, 1999, Judge Cote issued a scheduling order requiring discovery to be completed by late October 1999. (Dkt. No. 30:6/1/99 Scheduling Order.)
At a June 8, 1999 Board meeting, Mercer made a presentation which "calculated the cost impact of eliminating the retiree contribution for some classes of retirees age 65 and over." (Ex. F: 6/8/99 Board Minutes at VI; Ex. 14:11/10/99 Meberg Aff. ¶ 3.) After Mercer's presentation, the Trustees expressed their "desire to make improvements for retirees aged 65 with at least 15 years of service if financially prudent" and delegated further analysis and decisionmaking authority to the Fund's Benefits Sub-Committee. (Ex. F: 6/8/99 Board Minutes at VI; 11/10/99 Meberg Aff. ¶ 3; see also Ex. 16:11/11/99 Supp. Grabois Aff. ¶ 8.)
The June 8 Board meeting minutes also state, without elaboration, that "Mr. Brossman reported that the Lynch litigation was proceeding and that discovery had been scheduled." (6/8/99 Board Minutes at VII.) Richman testified that "at some point between March and June of 1999" — i.e., "[a]t the time that the trustees were considering the restoration of the over 65 group" — he expressed the view to Brossman that "[b]y restoring benefits with the over 65 group right before a time — whether I thought [plaintiffs] were going to give up the case or we were going to prevail in pretty short order — that it was going to complicate the case because we would have to explain why it is we could reinstate the benefits after we terminated them." (Ex. O: Richman Dep. at 73.)
The Benefits Sub-Committee — composed of union Trustees Douglas McCarron and Douglas Banes and employer Trustees Artie Johansen and David Meberg — met on June 14, 1999. (Ex. H, Ex. 15:6/14/99 Sub- Committee Minutes; Ex. 16:11/11/99 Supp. Grabois Aff. ¶ 9; Ex. 14:11/10/99 Meberg Aff. ¶ 4.) The Sub-Committee said that to increase the Fund's income, employers would henceforth pay the Fund $.40 more per employee-hour ($.10 from a wage increase and $.30 from a reallocation to the Fund from other funds of payments contractually due to the union). (Ex. H, Ex. 15:6/14/99 Sub- Committee Minutes.) Estimating that approximately fifteen million hours are worked annually by Fund participants, the Sub-Committee calculated that the increase in the contribution rate of $.40 per hour multiplied by fifteen million projected hours would result in an increase in revenue to the Fund of six million dollars per year. (Ex. 14:11/10/99 Meberg Aff. ¶ 5.) In light of this increase in revenue to the Fund, the Sub-Committee reviewed the costs outlined in the Mercer reports — which indicated that restoration of free coverage to the 4700 retirees over age 65 and with at least fifteen pension credits would cost the Fund four million dollars per year (see Ex. G: 6/8/99 Mercer Report at 6) — and determined that it would be fiscally prudent to eliminate the contribution obligation for retirees age 65 and older with fifteen years of service. (Ex. 16:11/11/99 Supp. Grabois Aff. ¶ 9; Ex. 14:11/10/99 Meberg Aff. ¶ 6.)
At a July 22, 1999 Board meeting, the Trustees reviewed and ratified the Benefits Sub-Committee's decision. (Ex. I: 7/22/99 Board Minutes at III; Ex. 16:11/11/99 Supp. Grabois Aff. ¶ 10.)
Continuation of the Litigation, Discovery of Mercer's Actuarial Error and the Restoration of Free Coverage to all Remaining Retirees
A second amended complaint, filed on August 5, 1999, substituted the current plaintiffs, none of whom is a disability retiree, for the original ones, and noted that most retirees' benefits had been restored. (Dkt. No. 33: 2d Am. Compl.) In September and October 1999, plaintiffs deposed six trustees, the Fund's Director (Grabois) and assistant director, and Morris Snow, the Mercer actuary who also served as defendant's expert witness. (See Pls. Br. at 13.) Defendants deposed the three named plaintiffs and plaintiffs' expert witness. (See id.)
On November 15, 1999, the Fund moved for summary judgment, inter alia asserting that the undisputed facts showed that the November 1998 Resolution was properly adopted and that "the Trustees acted after consideration of substantial evidence concerning the financial condition of the Welfare Fund." (Dkt. No. 36: Fund Summary Judgment Br. at 14; see also Dkt. Nos. 35, 37-38.)
Plaintiffs opposed the motion and cross-moved for summary judgment. (Dkt. Nos. 41-47, 49-51.) Plaintiffs argued that the Trustees should have realized that the Mercer projections they relied on in reaching their November 1998 decision to impose premiums on retirees, were outdated — the projections had been made in July 1997 based on the Fund's condition as of June 30, 1996 and did not take into account contribution increases and cost controls that were already saving the Fund $30 million per year. (Ex. U: Pls. Summary Judgment Br. at 9-20.) In addition, plaintiffs argued that Mercer's projection of $24 million per year in savings on which the Trustees had based their decision to impose premiums did not make sense unless a large portion of the savings was to come from retirees who decided to drop coverage. (Id. at 31-34.) Specifically, plaintiffs pointed out that "[e]ven if all 8000 retirees were under age 65 and married — which, obviously, is not true — $180 per month from each of them would total only $17 million in a year." (Id. at 33 n. 140.)
On December 10, 1999, Mercer's Dr. Snow admitted in a reply affidavit that Mercer's projection of a $24 million annual savings from retiree premiums "was wrong as the result of mathematical error." (Ex. T, Ex. 19: 12/10/99 Snow Reply Aff. ¶ 1.) Snow stated that when he recalculated Mercer's projections, based on Mercer's old assumptions, he arrived at "revised projected annual savings" of $17.3 million, out of which $9.7 million would be saved from premium collection and $7.6 million "would be saved from retirees dropping coverage." (Id. ¶ 2.)
Fund counsel Richman testified that this "mathematical error" came to light as a result of his and his colleagues' persistent questioning of Mercer as they prepared the defendants' reply brief:
My view is that [Mercer's error came to light] because we, Schulte, Roth Zabel [the Fund's outside counsel], had been working through some concepts and numbers and preparation for the reply brief and we kept asking questions of Mercer, various people at Mercer, as to how they did their number work . . . and we would come back with answers and we would ask more questions and I believe that caused them to recognize that they made a mistake.
(Ex. 9: Richman Dep. at 43-44.)
Richman "was extremely upset that at a very late hour in the litigation a mistake had come to light in Mercer's calculations." (Ex. O: Brossman Dep. at 61-62.) Richman "was concerned that because of the error, [the Fund's] opportunity to obtain summary judgment had been reduced." (Ex. O, Ex. 9: Richman Dep. at 52.)
According to Brossman:
[U]p until this point in time, the feeling of counsel which had been expressed to the trustees was that this litigation was a slam-dunk, that the trustees had certainly not breached any fiduciary responsibility in their decision-making process concerning the retirement amendments.
Ron [Richman] expressed a concern that at this late hour a question with respect to the dollar amount of the impact could be a factual issue which would lead to further examination, litigation, discussion.
So it was not viewed positively, because it appeared that it might result in an extension of the litigation, and part of the potential damages from Mercer were the legal fees involved with the litigation.
Q: You said that was part of the potential damages from Mercer. What other potential damages from Mercer were there?
A: I don't remember the details of Ron's specific discussions as to the damage claim, but they certainly made a serious error in a major litigation, and Ron's recommendation, which co-counsel concurred with, was to put them on notice to notify their malpractice carrier.
Q: The error had not simply been in litigation but in the original projection on which the trustees had acted in November 1998, is that correct?
A: That's correct.
(Ex. O, Ex. 2: Brossman Dep. at 65-67, emphasis added.)
At Brossman's request, Richman came to a December 15, 1999 Trustees meeting to discuss "the mistake and its impact." (Ex. O: Brossman Dep. at 63, 65.) Richman told the Trustees "that I thought it would make it much more difficult for us to obtain summary judgment because the judge might be inclined to say that now there is a question about these numbers. . . . I was amazed, and I expressed that amazement to the trustees that this error could occur . . . and go on undetected." (Ex. O: Richman Dep. at 57, 61.) Trustees asked about litigation costs and Richman replied that the likely costs had now increased "significantly." (Ex. O: Richman Dep. at 63.)
At the same December 15, 1999 meeting, Richman suggested: that a subcommittee be created to look at this issue of the corrective numbers for the purpose of determining whether the trustees would decide in light of the change in the numbers and the estimated savings, whether it still made sense to charge a premium.
At this point in time, it was only to the under 65 group because the older [than] 65 group had already been reinstated.
(Ex. O: Richman Dep. at 65-66.) The December 15, 1999 meeting minutes read, in part, as follows:
IV. Report of Mercer:
The Trustees asked for a full explanation of the error in Mercer's reports and analysis concerning retiree co-payment that had recently been discovered in the context of the Enright litigation. Ms. Hughes reported that Mercer had made a mathematical error and never caught it so that all subsequent calculations were in error. Co-counsel put Mercer on official notice to advise their insurance carriers. Ms. Hughes stated that it was a mistake and offered Mercer's and Dr. Morris Snow's apologies.
(Ex. J: 12/15/99 Board Minutes at IV.)
At a February 17, 2000 Plan Design Committee meeting, Mercer's Dr. Snow "reviewed the fund valuation projections as of June 30, 1996 — June 30, 1999" and "noted that several factors contributed to far better results than projected by Mercer." (Ex. K, Ex. 22:2/17/00 Plan Design Comm. Minutes at 1.) Specifically, Snow reported that: "(1) number of hours worked has increased from 14,232,000 as of June 30, 1996 to 17,849,000 as of June 30, 1999; (2) average contribution per hour increased from $5.86 as of June 30, 1996 to $8.30 as of June 30, 1999; (3) various plan redesigns resulted in lower benefit payments than projected; and (4) administrative costs were reduced." (Id.) The February 17, 2000 Plan Design Committee minutes also state that:
Dr. Snow noted that Mercer's original estimate of savings from retiree contributions was $24,000,000. He reiterated that Mercer had erred in its computations and that the actual estimated savings should have been $17,3000,000 [sic]. He stated that $7,600,000 of the estimated savings was expected to come from retirees dropping coverage, however this savings failed to materialize because only an insignificant number of retirees actually dropped coverage. Of the remaining estimated savings of $9,700,000, $4,000,000 was projected from contributions from disabled participants and widows, however, the Trustees did not implement a co-pay for these groups. Accordingly the actual savings was $5.7 million however the decision to eliminate contributions from retirees 65 and older with fifteen years of service effective July 1, 1999 resulted in an actual annual savings of $2.7 million.
The Trustees expressed great concern over the gap between Mercer's estimated savings of $24 million which formed the basis of their decisions, and the actual savings of $2.7 million. Mr. Brossman expressed dismay that Mercer had failed to advise the trustees that $7.6 million in savings was projected from retirees dropping coverage.
(Id.)
The full Board met on March 8, 2000 and decided to restore free medical coverage, effective July 1, 2000, for all remaining retirees, including any previously dropped for non-payment of premiums. (See, e.g., Ex. M: 3/8/00 Board Minutes at IV; Ex. N: 3/29/00 Richman Letter to Pls. Counsel, confirming reinstatement of coverage.) Of the six union Trustees at the March 8 meeting, five had not taken part in the original decision to impose retiree premiums. (Compare Ex. 23: Resolution with 3/8/00 Board Minutes at 1.) Brossman testified as follows with respect to the discussion at the March 8, 2000 Board meeting:
Mercer at this meeting and for the first time in an extended time period came in with updated financial information, an actuarial valuation of the fund as of June 30, 1999.
The trustees learned for the first time that the actual financial performance of the fund was far better than Mercer had previously projected.
The reasons for that are set forth in the minutes, but basically everything was positive with respect to the fund. The industry is at historic highs in New York. The last number of years, the construction industry has been extraordinarily busy, so the hours were much higher than Mercer had guesstimated.
The investments of the fund had done well. More money had been directed to contributions. Administrative expenses had decreased, and basically the number of eligibles hadn't changed, so their projections showed that the fund was in a very good financial situation as of June 30, 1999, and the meeting that you are talking about is March 2000 almost nine or ten months later, and the same trend we knew had gone through the year. If anything, hours had even increased.
So based on that, the discussions were that this fund has gone from sort of what was perceived as a horrible financial situation to a very favorable financial situation with the projection being positive into the future with the numbers just expected to continue to improve into the future.
So based on that, the trustees — and based on the fact that the real impact of the retiree changes at that point was about 2.7, $2.9 million in contributions, the trustees agreed to, effective July 1, 2000, eliminate the contributions for the 55 to 65 group because the 2.7, 2.9 million in that context was really not material.
Q: Even in the original context, 2.7 million was much less than the retirees [sic — trustees] had originally had in mind, correct?
A: It was much less than the trustees had — it was much less than the trustees had believed would be the financial impact on the fund at that time.
(Ex. O, Ex. 2: Brossman Dep. at 76-78, emphasis added.)
As to discussion of this litigation at that meeting, the minutes state only that "Ron Richman reported on the status of the Enright litigation." (3/8/00 Board Minutes at II; see also Ex. O: Brossman Dep. at 78-82; Ex. O, Ex. 9: Richman Dep. at 73.) Brossman testified as follows with respect to Richman's report and the trustees' discussion in general about the Enright litigation:
A. My recollection is that he [Richman] reported that the judge had decided not to rule on the motions and was going to go forward with a limited trial at some point in the future.
. . . .
[M]y recollection is that he had indicated that the judge had indicated that she would have a limited scope trial because of the extensive discovery in the case and that it would not be before a jury.
Q: Did he make any statements concerning the judge's attitude toward the case?
A: My recollection is Mr. Richman indicated that the judge was very favorably disposed to the trustees, the fund's position in the case.
Q: Was there any reference during his discussion to the Mercer mistake?
A: At this meeting?
Q: Yes.
A: We had already had pretty extensive discussion about it, but the answer is, yes, there was some discussion about it because a bunch of the trustees were new.
If you look at the trustees who attended the meeting, this was a full complement of new union trustees, so I think Ron [Richman] spent a little time going through the mistake, because they had never heard it directly from counsel before.
Q: Did any of [the trustees] ask any questions concerning the litigation at this meeting or Mr. Richman concerning the mistake?
A: My recollection is that there was discussion concerning the impact on the litigation if the trustees made changes on the retirement co-pay.
Q: What was the discussion?
A: The question was raised would this be viewed as a bad thing for the litigation, because Mr. Richman had indicated a successful conclusion was in sight, and that the question came out, if this is done, will it potentially complicate the litigation.
I don't know which trustee or which trustees, but there was some thought that perhaps changes should not be implemented until after the conclusion of the litigation, so as not to complicate any issue.
The decision obviously that is reflected here was to make the changes, notwithstanding any impact it might have on the litigation based on the financial status of the fund and the thought that it is the right thing to do at this point.
Q: . . . [W]as there an answer given to that question . . . of whether making the change would impact on the litigation . . . ?
A. My recollection is Ron [Richman] indicated that it might have an impact on the litigation but the trustees should do what they considered should be prudent and responsible, notwithstanding a potential negative impact on the litigation.
(Ex. O: Brossman Dep. at 78-82, emphasis added.) Richman's testimony with respect to his report at the March 8 meeting is similar:
A: My report about the case was what had happened subsequent to December 15th, which was we had a conference with the judge, at which time the judge suggested to both parties that we have a limited trial. She suggested to both parties there would not be a jury in the case.
Q: Had the judge ruled on that question?
A: No, the judge had not ruled on that question, but what I reported to the trustees was clearly that the judge was very much in favor of not having a jury and that I believed that the judge would rule that there was no jury in the case.
. . . .
Q: Did you express any view . . . on what the consequence would be if there was a jury trial?
A: At the meeting on the 8th, I believe I expressed the view that without a jury, I felt very, very comfortable that the judge was going to rule in our favor given the opinion that she wrote [ruling on the preliminary injunction] . . . and given her reaction at the conferences that we had, I expressed the view in front of the judge that I felt very comfortable we were going to win.
I also expressed the view that on a couple of occasions or at least one occasion, possibly two, that I had said to the judge when she was talking about having a limited trial that, in fact, the case would be resolved by her dealing with the point that we raised, that is the legal point, that the trustees were not acting as fiduciaries. I told the trustees that it was a very good sign in my mind that the judge was not interested in dealing with that point.
Q: Why was that a good sign?
A: In my mind it was a good sign and I told the trustees because it suggested to me that the judge thought the best way to handle this case was not to overrule the Second Circuit precedent on the basis of a new Supreme Court case and grant us summary judgment, but the best way to handle this case was to have this limited trial at which we would prevail and which an appeal would obviously be much more difficult.
Q: I don't think you answered my question as to whether you expressed any view as to what the consequences would be if there was a jury trial?
A: If there was a jury trial, I think the only thing I indicated that it would be more difficult, I would suspect, but I still thought we were going to prevail under any circumstances and expressed that view.
(Ex. O: Richman Dep. at 68-70, emphasis added.)
In March or April, 2000, the Fund fired Mercer for its mistake. (Ex. O: Forde Dep. at 29-31; Ex. O: Richman Dep. at 62.)
At a conference before Judge Cote in June 2000, plaintiffs dropped their claim for damages and announced they would seek attorneys' fees on a "catalyst" theory (see, e.g., Pls. Reply Br. at 5; Fund Br. at 10) and Judge Cote denied the cross-motions for summary judgment as moot. (See Dkt. No. 62:6/8/00 Order.) On August 18, 2000, plaintiffs moved for attorneys' fees (Dkt. Nos. 65-66, 73-74) and on September 1, 2000, defendants cross-moved for attorneys' fees in opposing plaintiffs' motion (Dkt Nos. 67-70, 76-77). Judge Cote referred the motions to me on September 19, 2000, and at the same time, this case was reassigned from Judge Cote to Judge Scheindlin. (See Dkt. Nos. 71-72, 75.)
ANALYSIS
I. APPLICABLE LEGAL STANDARDS GOVERNING ATTORNEYS' FEES IN ERISA CASES
An application for attorneys' fees under ERISA is governed by 29 U.S.C. § 1132(g)(1), as follows:
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).
In Chambless v. Masters, Mates Pilots Pension Plan, 815 F.2d 869, 871 (2d Cir. 1987), cert. denied, 496 U.S. 905, 110 S.Ct. 2587 (1990), the Second Circuit set forth five factors a court should consider in exercising its discretion concerning attorneys' fees:
An application for attorney's fees in an ERISA case is governed by 29 U.S.C. § 1132(g)(1). Ordinarily, the decision is based on five factors: (1) the degree of the offending party's culpability or bad faith, (2) the ability of the offending party to satisfy an award of attorney's fees, (3) whether an award of fees would deter other persons from acting similarly under like circumstances, (4) the relative merits of the parties' positions, and (5) whether the action conferred a common benefit on a group of pension plan participants.
815 F.2d at 871 (fn. omitted); accord, e.g., Jones v. Unum Life Ins. Co., 223 F.3d 130, 138 (2d Cir. 2000); Miller v. United Welfare Fund, 72 F.3d 1066, 1074 (2d Cir. 1995); Mendez v. Teachers Ins. Annuity Ass'n College Ret. Equities Fund, 982 F.2d 783, 788 (2d Cir. 1992).
See also, e.g., Dunnigan v. Metropolitan Life Ins. Co., 99 F. Supp.2d 307, 326 (S.D.N.Y. 2000) (Scheindlin, D.J.); Aramony v. United Way, 28 F. Supp.2d 147, 174 (S.D.N.Y. 1998) (Scheindlin, D.J.),aff'd in relevant part, 191 F.3d 140 (2d Cir. 1999); Meyer v. Insurance Co. of America, 97 Civ. 4678, 1998 WL 709854 at *14 (S.D.N.Y. Oct. 9, 1998) (Peck, M.J.).
"It is well established that a plaintiff need not satisfy all five factors in order to receive attorney's fees." Apple v. Apple, 66 F. Supp.2d 465, 471 (W.D.N.Y. 1999); see, e.g., Mendez v. TIAA-CREF, 982 F.2d at 789; Rise v. Rochester Laborers' Annuity Fund, 888 F. Supp. 494, 500 (W.D.N.Y. 1998) ("No single [Chambless] factor is necessarily decisive, and not all factors may be germane in a particular case."); Scalamandre v. Oxford Health Plans (N.Y.), Inc., 823 F. Supp. 1050, 1065 (E.D.N.Y. 1993) ("No one of the five factors is necessarily decisive, and some may not even be appropriate in a given case, but together they comprise 'the nuclei of concerns that a court should address in applying [§ 1132(g)].'").
The Second Circuit in Chambless noted that "ERISA's attorney's fee provisions must be liberally construed to protect the statutory purpose of vindicating retirement rights, even when small amounts are involved."Chambless v. Masters Mates Pilots Pension Plan, 815 F.2d at 872.
Indeed, some courts in this Circuit have taken the position that "[b]ecause ERISA is a remedial statute, a prevailing plaintiff with an ERISA claim should ordinarily get fees unless special circumstances would make it unjust." Cefali v. Buffalo Brass Co., 748 F. Supp. 1011, 1018 (W.D.N.Y 1990); accord, e.g., Birmingham v. SoGen-Swiss Int'l Corp. Ret. Plan, 718 F.2d 515, 523 (2d Cir. 1983) ("attorney's fees may be awarded to the prevailing party under ERISA in the absence of some particular justification for not doing so"); McLean v. Continental Cas. Co., 95 Civ. 10415, 1997 WL 566117 at *3 (S.D.N Y Sept. 11, 1997) (quotingCefali); see also, e.g., Citrin v. Erikson, 918 F. Supp. 792, 800 (S.D.N.Y. 1996) ("Although the awarding of attorneys' fees is 'discretionary, not mandatory,' the Second Circuit favors awarding attorneys' fees to prevailing plaintiffs in ERISA cases 'in the absence of some particular justification for not doing so.'") (citations omitted); Rice v. Rochester Laborers' Annuity Fund, 888 F. Supp. at 500 ("The Second Circuit appears to have indicated a policy in favor of awarding fees to the prevailing plaintiff in most cases."); Scalamandre v. Oxford Health Plans (N.Y.), Inc., 823 F. Supp. at 1064 (quotingBirmingham).
In addition, in ERISA cases, as in other areas of the law, "[i]t is a settled matter that, where attorney's fees are permitted, and where a lawsuit provided the 'catalyst' for the sought policy change, the plaintiff may be considered to have 'prevailed' and attorney's fees may be justified," even where the case does not culminate in a final judgment. Rodonich v. Senyshyn, 52 F.3d 28, 35 (2d Cir. 1995); see, e.g., Hewitt v. Helms, 482 U.S. 755, 760-61, 107 S.Ct. 2672, 2676 (1987) ("A lawsuit sometimes produces voluntary action by the defendant that affords the plaintiff all or some of the relief he sought through a judgment —e.g., a monetary settlement or a change in conduct that redresses the plaintiff's grievances. When that occurs, the plaintiff is deemed to have prevailed despite the absence of a formal judgment in his favor.");Marbley v. Bane, 57 F.3d 224, 234-35 (2d Cir. 1995); Adams v. Bowater Inc., No. Civ. 00-12-B, 2000 WL 1092253 at *5-6 (D.Me. Aug. 2, 2000) ("in ERISA cases, a determination of attorney fees can occur after the case was dismissed as moot or settled. . . . To recover attorney fees as the 'prevailing party' plaintiffs must prove that the [ERISA] claim was causally related or acted as a catalyst in obtaining the relief."); Apple v. Apple, 66 F. Supp.2d at 466-72 (awarding fees in ERISA action following settlement); Noe v. Unum Life Ins. Co., 96 Civ. 0177, 1998 WL 80199 at *4 (S.D.N.Y. Feb. 24, 1998) ("The court may award either party attorney's fees in an ERISA case. . . . Moreover, '[t]he fact that respondent prevailed through a settlement rather than through litigation does not weaken her claim to fees.'"), aff'd, No. 98-7459, 165 F.3d 14 (table), 1998 WL 777403 (2d Cir. Oct. 30, 1998); Ross v. Diversified Benefit Plans, Inc., 978 F. Supp. 795, 797-98 (N.D.Ill. 1997); Cefali v. Buffalo Brass Co., 748 F. Supp. at 1016-18; Bozych v. Hartford Fire Ins. Co., No. 85 C 9875, 1989 WL 27444 at *5 (N.D.Ill. Mar. 20, 1989) ("An award of attorneys' fees is not necessarily precluded in this [ERISA] case simply because no judgment on the merits has been entered and the complaint is dismissed as moot. . . . Thus, a plaintiff whose lawsuit spurs the defendant to grant the requested relief, mooting the case, may still be a prevailing party."); Curry v. Contract Fabricators Inc. Profit Sharing Plan, 744 F. Supp. 1061, 1068 (M.D.Ala. 1988) ("catalyst" theory under Civil Rights Attorney Fee Statute, 42 U.S.C. § 1988, "should apply to requests for attorney fees under ERISA"), aff'd, 891 F.2d 842 (11th Cir. 1990).
In order for a plaintiff to recover attorneys' fees in the absence of a judgment in its favor, it must show that it obtained some or all of the relief sought and that "the plaintiff's lawsuit was a 'catalytic, necessary, or substantial factor in attaining the relief.'" Koster v. Perales, 903 F.2d 131, 135 (2d Cir. 1990) (quoting Gerena-Valentin v. Koch, 739 F.2d 755, 758-59 (2d Cir. 1984)); accord, e.g., G.M. v. New Britain Bd. of Educ., 173 F.3d 77, 81 (2d Cir. 1999); Marbley v. Bane, 57 F.3d at 234-35; Pascuiti v. New York Yankees, 108 F. Supp.2d 258, 265 (S.D.N.Y. 2000) (Scheindlin, D.J.); see also cases cited above. The Second Circuit has explained that the requisite causal connection exists where the lawsuit was "the catalyst in bringing about a goal sought in litigation, by threat of victory (and not by dint of nuisance and threat of expense)" and that thus, "[i]mplicit in the 'catalyst' theory of attorney's fees is the notion that, had the litigation proceeded to a final judgment, judgment could have been for the plaintiff and that this prospect brought about a result the plaintiff sought." Marbley v. Bane, 57 F.3d at 234-35; accord, e.g., McManus v. Gitano Group, Inc., 59 F.3d 382, 384 (2d Cir. 1995) (applying Marbley v. Bane catalyst doctrine in ERISA attorneys' fee context). The Second Circuit has recognized that while "[i]n the exercise of its discretion, the district court will doubtless consider the strength of a claim in gauging its catalytic effect, . . . the district court is not required to resolve the merits of the lawsuit in order to decide an application for attorney's fees." Marbley v. Bane, 57 F.3d at 235.
II. APPLICATION OF THESE LEGAL STANDARDS TO THIS CASE
Some courts have indicated that the "catalyst" test should be used as a threshold test to determine prevailing party status before proceeding to the five Chambless factors. See, e.g., Phelps v. U.S. West, Inc., No. 97-1270, 141 F.3d 1185 (table), 1998 WL 165117 at *3 n. 6 (10th Cir. April 3, 1998); Davis v. Wal-Mart Stores, Inc., 67 F. Supp.2d 1274, 1286-87 (D.Kan. 1999). The Second Circuit, however, has not clearly directed whether the "catalyst" theory is a threshold test, an alternative to the Chambless test, or is to be used in conjunction with the Chambless test. See, e.g., McManus v. Gitano Group, Inc., 59 F.3d 382, 384 (2d Cir. 1995) (disposing of case on catalyst test alone with no discussion of five factors). In this case, because there is so much overlap between the fourth and fifth Chambless factors and the catalyst test, the Court believes it best to use the catalyst theory in conjunction with the Chambless five factor test.
The first Chambless factor, the Fund's culpability or bad faith, weighs in favor of the Fund. There is no evidence of any bad faith by the Fund or its Trustees, either in making the decisions they did or in the conduct of the litigation.
The second factor, the Fund's ability to satisfy an award of attorneys' fees, is of little significance, but favors plaintiffs. It is undisputed that the Fund can afford to pay plaintiffs' attorneys' fees. (See Fund Br. at 12.) Moreover, because the Fund has put Mercer on malpractice notice (see, e.g., Ex. J: 12/15/99 Board Minutes at IV) it is conceivable that any award here ultimately will be borne not by the Fund and its participants, but by Mercer and Mercer's malpractice carrier.
The third and fourth factors, deterrence and the merits of the parties' positions, can be considered together. The Court need not decide who would have prevailed if the case went to trial. See, e.g., Marbley v. Bane, 57 F.3d 224, 235 (2d Cir. 1995). The Trustees would have benefitted from the fact that review of their actions would be under the deferential "arbitrary and capricious" standard. (See page 13 above.) But as discussed below, it is also clear that the Trustees' decision in November 1998 was based on erroneous calculations and assumptions provided by the Fund's consultant, Mercer. An award of attorneys' fees to plaintiffs would have a beneficial deterrent effect on other Trustees who otherwise might be tempted to rely on a consultant's information without sufficient questioning and analysis of the consultant's data. Moreover, it is undisputed that, prior to adopting the November 1998 Resolution, the Trustees did not discuss whether the approximately 1000 disabled retirees would be required to contribute to the cost of their medical coverage, and the December 15, 1998 Notice was silent on this issue, causing much confusion and anxiety on the part of disabled Plan participants. It is also undisputed that the Trustees never discussed how much of the savings Mercer projected would come from retirees dropping medical insurance coverage, a result that the Trustees did not want. Even assuming, as defendants argued in their summary judgment papers, that these types of oversights are not actionable under the arbitrary and capricious standard, they should be discouraged and would be discouraged in the future by an award of attorneys' fees to plaintiffs in this case. Thus, the third and fourth Chambless factors weigh in favor of granting attorneys' fees to plaintiffs. "It seems self-evident that awarding attorney's fees will encourage defendants to use greater caution in future situations of this type." Rose v. Roslentes Glovers' Annuity Fund, 888 F. Supp. 494, 500 (W.D.N.Y. 1995).
The fifth factor, whether the lawsuit conferred a common benefit on Fund participants, brings the "catalyst" theory into play. It is undisputed that in November 1998, the Fund announced a plan to charge retirees, arguably including disabled retirees, a payment for medical insurance. It is also undisputed that by June 2000, the Fund withdrew all aspects of that plan, and all retirees were again receiving free medical insurance. What the parties dispute is whether plaintiffs' lawsuit was a catalyst for that result. In this case, weighing all the factors, the Court finds this fifth factor to be dispositive, in plaintiffs' favor.
The Court finds that plaintiffs' lawsuit was a catalyst to restoration of free medical benefits to retirees.
While plaintiffs point to several Trustee decisions that plaintiffs claim were caused by this lawsuit (see, e.g., Pls. Br. at 8-11; Pls. Reply Br. at 13- 16), the Court focuses primarily upon the discovery of the significant error in Mercer's projections. The Trustees' November 1998 decision to require co- payments from retirees was based on Mercer's projections of a $24 million annual cost saving. (See pages 3-4 above.) In their brief opposing defendant's summary judgment motion, plaintiffs pointed out that Mercer's $24 million number made no sense — "[e]ven if all 8000 retirees were under age 65 and married — which, obviously, is not true — $180 per month from each of them would total only $17 million in a year." (Ex. U: Pls. Summary Judgment Br. at 33 n. 140.)
While defense counsel takes credit for discovering Mercer's error (Ex. 9: Richman Dep. at 43-44, quoted at page 17 above), it is undisputed that Mercer's error was discovered in the course of preparing the Fund's reply brief on the summary judgment motion (id.; see also Ex. J: 12/15/99 Board Minutes at IV, describing Mercer's error as "discovered in the context of the Enright litigation"). In other words, from the November 1998 Board decision based on Mercer's projections until a year later in December 1999, neither Mercer, the Trustees nor the Fund's counsel discovered Mercer's error; the error was discovered only in the course of this litigation. (See Pls. Reply Br. at 9 10: "While defendants claim their own lawyers' 'persistent questioning of Mercer . . . led to Mercer discovering [the] mistakes,' the fact is that Mercer was only interrogated in the hope of answering questions raised by plaintiffs and, not, as they should have been, by the trustees. Without this litigation, Mercer's mistakes would not have been discovered. . . . [E]ven if the contrary protestations in Defendants' Brief were taken completely at face value — since Mercer's mistake came to light solely as a result of the litigation, defendants' admission that discovery of the mistake played a contributing role in the restoration of free benefits would itself support and require a fee award.")
Mercer's error, obviously, was quite significant. Rather than $24 million in savings, the savings estimate should have been $17.3 million. And of that savings, $7.6 million was estimated to come from retirees dropping coverage, which the Trustees did not want to happen. And of the remaining $9.7 million, $4 million was projected from co-payments from disabled retirees, who the Trustees had decided were not to be required to make co- payments. (See Ex. K, Ex. 22:2/17/00 Plan Design Comm. Minutes at 1, quoted at pages 19-20 above.) When the Trustees learned these facts, the Trustees voted to restore free medical benefits for all remaining retirees, i.e., retirees under age 65 (the Trustees having previously restored benefits to disabled retirees and then to retirees over age 65).
The Fund points to improved financial projections and a change in union Trustees as the reasons for the restoration of benefits for the under- 65 retirees. (See Fund Br. at 19-22.) While these factors also contributed to the Trustees' decision, the Court has no doubt that the litigation-inspired discovery of the errors and erroneous assumptions in Mercer's projections also was a significant factor — a catalyst — in the restoration of retirees' benefits.
The Court also finds that plaintiffs' lawsuit played a catalytic role in the restoration of free medical coverage to over age 65 retirees effective July 1, 1999. The Fund's argument to the contrary — that the decision to restore free coverage to this group should be attributed, not to the institution of this litigation, but instead, to union members' protests and the resulting decision by the Union to reallocate monies to the Fund from other funds (see Fund Br. at 5-7, 18-19) — fails for two reasons. First, protests from union members, while perhaps stronger than predicted, were not unexpected. (See, e.g., Ex. O, Ex. 2: Brossman Dep. at 18; Fund Br. at 5, admitting that "the implementation of the co-payment would cause some dissatisfaction among the participants.") Second, the general condition of the other funds was known to the Trustees in November 1998 when premiums were imposed, as was the contractual provision which enabled the union to shift monies from those other funds, yet the Trustees (half of whom were union representatives) had not discussed using this money instead of imposing premiums. (See Ex. O: McCarron Dep. at 15-18, 21; Ex. O, Ex. 2: Brossman Dep. at 28-29.) There is no evidence of any significant change between the imposition of premiums effective January 1, 1999, and the move two months later to restore free coverage to over age 65 retirees, other than the commencement of the instant action. Accordingly, it is a reasonable inference that the lawsuit prompted the Trustees' change of heart.
Plaintiffs also claim that this litigation was the catalyst for the extension of the January 31, 1999 deadline for payment of coverage and the decision not to require co-payment from disabled retirees. (See,e.g., Pls. Br. at 8-11; Pls. Reply Br. at 13-16.) The Court need not reach these issues, since it has found that the litigation was the catalyst for other significant benefits to the plaintiff class of retirees.