02-2765 & 02-3871 Helfrich v. Carle Clinic Association, P.C.

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“[W]e cannot imagine a good claim of estoppel that would require a plan to forfeit the tax benefits on which its actuarial soundness relies. Plaintiffs’ position, if accepted, would cost Carle, their co-workers, and themselves considerable sums in taxes. Helfrich estimated before the case began that, under his position, Carle would need to contribute about $20 million extra to the plan; Carle also would lose tax deductability of past and future contributions, costing it (and thus its physician-owners) millions more. It is unclear whether plaintiffs would be winners; that depends on whether the increase in pension benefits would be enough to cover their tax obligations. Most other current and former Carle employees-those not affected by the cap because their annual earnings were less than $320,000-would be certain to lose because they would suffer tax consequences without offsetting gains. Overriding the plan’s terms to achieve that dubious end is not a proper function of an equitable doctrine.

“Nor did the district judge err in concluding that fees in the range of $160,000 are reasonable, given the stakes of the case: a loss would have cost Carle $20 million or more and had awful tax consequences for many current and former employees. Carle retained ERISA specialists to protect its interests; this was a prudent step. (Plaintiffs stress that they hired less expensive lawyers. The difference shows. You get what you pay for.)

“Unfortunately, however, the district judge did not exercise the billing judgment that is essential in all fee-shifting cases. Carle sought compensation for all legal time and expenses racked up during the suit’s pendency. That included, for example, about $885 billed to Carle for the expense of preparing a press release describing the suit and $95 for the time one lawyer devoted to preparing an application for admission to the bar of the United States District Court for the Central District of Illinois. Press releases are not part of a legal defense (even if the client elects to have the drafting done by lawyers), and admission to the local bar would have a benefit outlasting this case. Time devoted to exploration of insurance issues also should not be shifted to the plaintiffs; it is no concern of this litigation how things happen behind the scenes in the event the plaintiffs prevail. The district court should eliminate these items on remand and review the remaining charges to see whether fee-shifting is appropriate with respect to each kind of service rendered. Carle is entitled to recover the cost of legal defense (including the cost of preparing a budget, a normal incident in any substantial suit), but not legal expenses that do not produce a defense against the plaintiffs’ claims.”

Affirmed in part, and Vacated in part.

Appeals from the United States District Court for the Central District of Illinois, McCuskey, J., Easterbrook, J.