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Miller v. Deloitte Services, LP

United States District Court, M.D. Tennessee, Nashville Division

June 20, 2019




         Before the court is the plaintiff's sealed Motion to Set Attorneys' Fees (Doc. No. 37). The defendant does not oppose the motion, because the parties have already reached a confidential settlement; the fees will be deducted from the already agreed-upon settlement amount to be paid by the defendant and will not affect its liability. Counsel for the plaintiff submits that court approval of the attorney's fee is required in light of the plaintiff's intellectual disability and lack of capacity to contract.

         I. Background

         This action was filed in June 2018 by and through the plaintiff's “next friend, ” Wanda Padgett, against Deloitte Services LP (“Deloitte”), asserting claims under the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001, et seq. The plaintiff, who is approximately 32 years old, has an IQ of 54, suffers from life-long health and developmental problems, and is unable to live independently. There is no dispute that he is intellectually disabled and lacks the capacity to contract.

         In response to Deloitte's first Motion to Dismiss, filed in August 2018, the plaintiff filed an Amended Complaint. (Doc. No. 15.) The Amended Complaint asserts claims based on (1) the plaintiff's entitlement to recover plan benefits and to enforce rights under an ERISA plan, pursuant to 29 U.S.C. § 1132(a)(1)(B), and (2) breach of fiduciary duty under § 1132(a)(3), based on allegations that Deloitte had lost, misplaced or deleted a Designation of Beneficiary Form identifying the plaintiff as the beneficiary of a life insurance policy issued to his now-deceased father, who had been employed by Deloitte. The Amended Complaint also seeks attorney's fees under § 1132(g)(1). A separate count of the Amended Complaint seeks the appointment of a guardian ad litem for the plaintiff under Rule 17(c) of the Federal Rules of Civil Procedure or, alternatively, to “allow this action to play out” and “require[e] the appointment of a fiduciary upon any judgment or settlement, with the Court retaining jurisdiction to approve any settlement on behalf of the incompetent Plaintiff.” (Doc. No. 15 ¶ 101.)

         Deloitte promptly filed a Motion to Dismiss the Amended Complaint. The court denied the second motion in January 2019, rejecting the defendant's arguments that the Amended Complaint failed to state a claim for which relief may be granted and that any claims adequately stated were barred by the statute of limitations or failure to exhaust.

         Shortly thereafter, the court granted the plaintiff's motion under Rule 17(c)(2) of the Federal Rules of Civil Procedure for the appointment of a guardian ad litem to protect the plaintiff's interests. (Doc. No. 34.) On May 24, 2019, the parties filed a Sealed Joint Motion for Approval of Settlement, indicating they had reached a settlement as to all issues raised in this litigation. The court granted that motion. The Settlement Agreement specifically contemplates that XXXXX (Doc. No. 36-1 ¶ 3.)[1]

         The total settlement amount is $ XXXXX. Plaintiff's counsel requests an attorney's fee in the amount of $XXXXX, plus prepaid costs and expenses in the amount of $29, 606.95, most of which ($27, 819.68) are for fees paid to a law firm in Michigan for its efforts to enforce a $500, 000 judgment that plaintiff's counsel obtained in a separate action in state court in January 2017. Counsel represents that they successfully negotiated with the Michigan law firm to reduce the fee demanded from $37, 198.61 to $27, 819.68. Based on these figures, the total sum payable to the plaintiff, after the deduction of fees and costs, would be $ XXXXX .[2] A fee of $ XXXXX is equivalent to 35% of the settlement amount.

         In his motion, the lead attorney for the plaintiff represents that he began working on this case in January 2016 and that the matter has generally been protracted and complicated- involving a state court case in Tennessee to impose a constructive trust on the proceeds of the plaintiff's father's life insurance, attempts to enforce the judgment in that case in Michigan, and ultimately the filing of the ERISA lawsuit in this court. This case was only made possible by plaintiff's counsel's discovery, while litigating a Rule 60 motion filed in the state court case, of a partial beneficiary designation form dated January 2007. The attorney also represents that, at the time he took the case in January 2016, multiple attorneys had already recommended not pursuing the case and that the maximum recovery possible appeared to be $500, 000, based on the divorce decree between the plaintiff's parents, requiring his father to maintain life insurance for the plaintiff's benefit in the amount of $500, 000.

         Counsel represents that he had plaintiff “sign or otherwise agree to retention agreements with [his] law firm.” (Doc. No. 38-1 ¶ 27.) Although the retention agreement with counsel's firm contains a contingency provision (Doc. No. 38-9, at 2), counsel represents that “the point of [the agreement] was not to bind Plaintiff, but rather to evidence his approval of Counsel's proceeding with actions to recover the funds” sought in this case (Doc. No. 38-1 ¶ 27). In other words, counsel understood that the plaintiff, in light of his low IQ and overall level of functioning, likely lacked the capacity to enter into a contingency fee agreement.

         The law firm's records reflect that lead counsel devoted over 370 billable hours to this matter, and the law firm as a whole billed over 500 hours. While lead counsel's ordinary billable rate is from $ XXXXX to $ XXXXX per hour, depending on the client and the subject matter of the representation (id. ¶ 23), the amount of fees sought represents an effective average hourly rate of approximately $ XXXXX or roughly XXXXX. The supervising partner on the case represents that his law firm “routinely engages clients in matters similar to this case at a contingency rate ranging between 33 and 40%, plus any advanced costs.” (Doc. No. 38-8 ¶ 4.) The “Prebill” records submitted by counsel reflect a total of 537.60 billable hours worked, at various billing rates. This number of hours multiplied by the billing attorneys' customary rates would result in a total fee of $ XXXXX. (See Doc. No. 38-1 Ex. C.)

         II. Legal Standards

         The plaintiff does not appear to seek an award of attorney's fees under ERISA's fee-shifting provision, per se. Rather, it appears that plaintiff's attorneys are entitled to be paid for their work on this case based on their retention agreement with the plaintiff, and the underlying settlement agreement specifically contemplates that an attorney's fee will be deducted from the total settlement amount. That is, plaintiff's attorneys are intended third-party beneficiaries of the settlement agreement. In addition, because of the plaintiff's status as a disabled person and his lack of capacity to contract, plaintiff's counsel presumes that the court's approval of both the settlement agreement and the amount of the attorney's fee to be deducted from the settlement amount is required and that Tennessee law governs the determination of whether the amount of the fee is reasonable. The defendant does not dispute that assumption, and the court, too, presumes without analysis that the plaintiff's request is governed by Tennessee law.

         Under Tennessee statute, the court has the power to approve a settlement made on behalf of a mentally disabled person, so long as it is in the disabled person's best interest, Tenn. Code Ann. § 34-1-121(b), and to approve the payment of any attorney's fee the court determines to be “necessary, ” id. § 34-1-113(a). Moreover, any attorney's fee in Tennessee must be “reasonable.” Tenn. Sup. Ct. R. 8, RPC 1.5. The court's determination of reasonableness

is a subjective judgment based on evidence and the experience of the trier of facts, and Tennessee has no fixed mathematical rule for determining what a reasonable fee is. Accordingly, a determination of attorney's fees is within the discretion of the trial court and will be upheld unless the trial court abuses its discretion.

Wright ex rel. Wright v. Wright, 337 S.W.3d 166, 176 (Tenn. 2011) (internal quotation marks and citations omitted).

         While the Tennessee Supreme Court has not expressly addressed what factors are to guide the consideration of the “reasonableness” of an attorney's fee in cases involving mentally disabled adults, it has addressed “the proper method for computing a reasonable attorney's fee when the attorney represents a minor.” Wright, 337 S.W.3d at 169. When an attorney represents a minor, courts should determine a “reasonable” attorney's fee by referencing Rule 1.5 of the Tennessee Rules of Professional Conduct, which also addresses the determination of reasonable fees when the client is an adult. These factors include the following:

(1) The time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;
(2) The likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer;
(3) The fee customarily charged in the locality for similar legal services;
(4) The amount involved and the results obtained;
(5) The time limitations imposed by the client or by the circumstances;
(6) The nature and length of the professional relationship ...

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