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5500 Preparer's Manual for 2012 Plan Years

5500 Preparer's Manual for 2012 Plan Years
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CCH® PENSION — 03/14/10

Fee award valid, despite its disproportionate size relative to benefit amount recovered

An attorney's fee award of $45,000 to an ERISA claimant was valid, even though the defined contribution plan benefits recovered as a result of the litigation amounted to approximately $650, the U.S. Court of Appeals in Philadelphia (CA-3) has ruled in Tomasko v. Ira H. Weinstock, P.C.

First appellate decision

The appellate court had previously vacated a district court's decision regarding attorney's fees, concluding that the court had not applied the familiar five-factor test correctly. On remand, the district court reconsidered the fee request, and awarded $45,000 to the prevailing ERISA claimant (who, in addition to the action to recover benefits, won a breach of fiduciary duty claim).

No proportionality rule

On appeal, the sponsor of the defined contribution plans argued that the disproportionate size of the fee award made it excessively punitive and therefore invalid.

The court rejected this argument. Fees need not be proportional to the amount of the judgment in order to be reasonable. Furthermore, the court observed, a considerable portion of the fees awarded in this case were incurred due to the original employer's choice to fight "tooth and nail" --the case is on its third appeal--despite the minimal stakes involved. (Both parties were lawyers whose dispute began when one left the other's employ to form his own practice.)

The court conceded that where an ERISA claimant achieves only a partial victory on the merits (as in this case), the fee award must be reduced accordingly. However, the record indicated that the district court did make the necessary reductions.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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