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Wolf v. Causley Trucking, Inc.

United States District Court, E.D. Michigan, Northern Division

November 13, 2017

FRANCES M. WOLF, Plaintiff,
CAUSLEY TRUCKING, INC., A Michigan Corporation, and GREGORY CAUSLEY, Defendants.


          THOMAS L. LUDINGTON, United States District Judge

         This matter involves an action under the civil enforcement provision of the Employment Retirement Income Security Act (“ERISA”), 29 USC § 1132. Plaintiff Frances M. Wolf brought this action to recover death benefits following the death of her husband, Randy Rieck (“Rieck”). Rieck was Vice President and Director of Maintenance at Defendant Causley Trucking, Inc. (“Causley Trucking”) a closely-held corporation wholly owned by Rieck's uncle, Defendant Gregory Causley (“Causley”) (collectively “Defendants”). After Mr. Rieck's death, Plaintiff applied for benefits under Causley Trucking's Death Benefit Only Plan (the “Plan”). Wolf was awarded $206, 405.39.

         Unsatisfied with the benefits determination, Wolf filed an appeal with Causley, who upheld the determination. Wolf filed suit in the Saginaw County Circuit Court, which was removed by Defendants to this Court on July 16, 2015 on the grounds that Wolf's claims were preempted by ERISA. Wolf filed an amended complaint on August 13, 2015. On August 31, 2015, Defendants moved to dismiss all but the first count of Wolf's amended complaint for denial of benefits under the plan. Wolf then moved to remand the action on September 17, 2015. On February 5, 2016, the Court denied Wolf's motion to remand, and granted Defendants' motion to dismiss in part. Plaintiff's denial of benefits claim (Count I) and her estoppel claim (Count IV) survived in their entirety, and her breach of fiduciary duty claim (Count II) survived in part. The matter was referred to Magistrate Judge Patricia T. Morris. The parties filed cross-motions for summary judgment on December 16, 2016.

         On March 23, 2017, Judge Morris issued her report, recommending that Defendants' motion be granted and Plaintiff's motion be denied. Plaintiff timely filed objections. On May 23, 2017, the Court entered an order overruling Plaintiff's objections, adopting the report and recommendation, granting Defendants' motion for summary judgment, and denying Plaintiff's motion to vacate the administrative decision. On the same day, judgment was entered for Defendants and Plaintiff's complaint was dismissed. On June 21, 2017, Plaintiff filed a notice of appeal. Thereafter, Defendants filed the instant motion seeking $130, 623 in attorney fees and $2, 386.53 in costs. For the reasons that follow, the motion will be denied.


         On November 17, 2004, Causley Trucking purchased several universal life insurance policies from Principal Life Insurance Company on the lives of certain key employees including Rieck. (Doc. 33 at PGID 387). Causley Trucking was the owner and beneficiary of the policy and paid all premiums for the policy. (Doc. 11, Ex. 2, at PGID 223; Doc. 40 at PGID 723-24). On November 30, 2004, the Board of Directors of Causley Trucking adopted a “Resolution Authorizing A Death Benefit Only Plan, ” which set forth the terms of the Death Benefit Only Plan (“Plan”). (Doc. 8 Ex. A). The Plan was created to “provide death benefits to the beneficiaries of [Causley Trucking's] eligible employees, if death occurs while the employee remains in the employment of [Causley Trucking] or has retired from employment after attaining age 65 with a minimum of 20 years of service.” (Id. at ¶ 1). The Plan provides that the “Board of Directors shall determine which employees, hereafter referred to as ‘Participants, ' are eligible for the Plan and the amount of death benefits payable on the life of each Participant under the Plan.” (Id. at ¶ 2).

         The Plan provides that Causley Trucking would enter into a DBO agreement with each participant. (Id.). The Plan further stated that Causley Trucking “may wish to purchase life insurance policies” to ensure sufficient assets to “meet its obligation to pay the death benefits provided for under this Plan.” (Id. at ¶ 3). These “key man” insurance policies were also intended to ensure the company would have sufficient assets available to replace the deceased employee's value to the company and carry on until it could find a suitable replacement employee. (Doc. 40 at PGID 725-26). Causley Trucking was “designated as owner and beneficiary of any such policies purchased and all rights and benefits accruing from such policies shall belong solely to [Causley Trucking]. Participants shall have no rights or interest in such policies.” (Id.). Causley, as president of Causley Trucking, would be the administrator and fiduciary of the Plan. (Id. at ¶ 4). Finally, the Plan provides that the “Plan's funding policy shall be that all the death benefits payable under the Plan shall be provided out of the general assets of [Causley Trucking]. Such general assets shall include any insurance proceeds received by the Corporation at the death of a Participant.” (Id. at ¶ 7).

         Pursuant to the Plan, Causley Trucking entered into a DBO agreement with Rieck on November 30, 2004 (“RDBOA”). (Doc. 8 Ex. B). The RDBOA provides that Rieck, the “Participant, ” was entitled to “payments in the amount no less than the cash value of the policy in equal installments over 10 years to the Participant's spouse while living.” (Id. at ¶ 1) (emphasis added). Notably, the RDBOA does not define “cash value.”

         According to the Summary of Policy Values provided by Principal Life, the policy had a fixed face value of $1, 059, 496, representing the amount payable to Causley Trucking at Rieck's death. (Doc. 40 at PGID 724; Doc. 36 Ex. 6 at PGID 499-502). As set forth in Principal Life's Summary of Policy Values, the surrender value of the policy at Rieck's death was $206, 405, less a “surrender charge” of $24, 706, yielding a “net surrender value” of $181, 699. Doc. 36 Ex. 6 at 499-502. Rieck passed away on August 7, 2014; Plaintiff was his beneficiary under the Plan and RDBOA. (Doc. 8 ¶ 9; Doc. 33, at PGID 391). Although “cash value” was undefined in the RDBOA, Plan Administrator Causley determined by reference to industry usage that “cash value” referred to the net surrender value of the policy, or the value of the policy if cancelled prior Rieck's death, and not to the fixed face value of the policy. Id.

         Plaintiff's complaint alleged that one or two weeks prior to Rieck's death, Causley informed Plaintiff that she would receive $400, 000 under the Plan. (Doc. 8 at ¶ 22). After Rieck's death, Causley advised Plaintiff that payment would be approximately $300, 000, and later $350, 000. (Id. at ¶¶ 23-24). Plaintiff alleged that Causley then arbitrarily reduced the death benefits amount to $206, 405.39. (Id. at ¶ 25). Defendants contend that Plaintiff misunderstood Causley's statements, as he was not intending to represent to Plaintiff that she would receive more than cash value of the policy. Rather, Causley intended to convey to Plaintiff that the $400, 000 comprised the death benefit under the RDBOA of roughly $200, 000, in addition to $25, 000 from a separate life insurance policy the company provided to Rieck, and $175, 000 from a separate life insurance policy Rieck purchased for himself through his company retirement plan account. (See Doc. 40 at PGID 727).


         Defendants argue that they should be awarded fees and costs as the King factors weigh in favor of such an award. Sec'y of Dep't of Labor v. King, 775 F.2d 666, 669 (6th Cir. 1985). Specifically, Defendants argue that Plaintiff maintained claims lacking any basis in law or fact, took unsupportable legal positions, and took other vexatious action such as prematurely appealing the Court's denial of remand, and repeatedly litigating the issue of remand without filing a procedurally proper motion. Mot. at 2-3, ECF No. 54. Defendants also argue that Plaintiff is financially capable of satisfying the award of fees and costs, and that entering such an award in this case would deter similarly situated Plaintiffs from filing baseless claims. Id. at 11.

         Plaintiff contends that the King factors militate against an award in this case. Specifically, she argues that she pursued this action in good faith, with an honest belief that she was entitled to additional benefits under the RDBOA. Resp. at 3, ECF No. 56. Plaintiff argues she believed she was entitled to additional benefits because the language of the RDBOA was unclear, and because Mr. Causley made three different representations to her regarding the money she would receive under the plan. Id. at 3-4. Plaintiff also contends that she is not financially capable of financing a fee award, that a fee award would have a chilling effect on ERISA beneficiaries' ability to protect their rights, and that her arguments in this case had merit. Resp. at 5-9, ECF No. 56.

         The parties also contest the reasonableness of fees requested in this case, including the hours worked and rates charged by defense counsel. As the Court finds a fee award is not warranted, the Court will not address the reasonableness of the fees requested.


         Pursuant to 29 U.S.C § 1132(g), “the court in its discretion may allow a reasonable attorney's fee and costs of action to either party.” The party seeking fees need not be a “‘prevailing party' to be eligible for an attorney's fees award.” Hardt v. Reliance Standard LifeIns. Co., 560 U.S. 242, 252 (2010). Rather, they must simply achieve “some success on the merits.” Id. at 256. “The punishment of bad faith litigants is a legitimate purpose under ERISA, but not the only purpose.” Armis ...

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