Jean A. McIntosh v. Pacific Holding Co. , 120 F.3d 911 ( 1997 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 96-2932
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Jean A. McIntosh, An Individual, *
and Harding & Ogborn, P.C., A *
Partnership of Nebraska and *
Colorado Professional Corporations, *
*
Appellants, * Appeal from the United States
* District Court for the District
v. * of Nebraska.
*
Pacific Holding Company, and *
Pacific Holding Company Employee *
Welfare Benefit Plan, *
*
Appellees. *
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Submitted: April 17, 1997
Filed: August 8, 1997
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Before WOLLMAN, JOHN R. GIBSON, and MORRIS SHEPPARD ARNOLD,
Circuit Judges.
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MORRIS SHEPPARD ARNOLD, Circuit Judge.
Jean A. McIntosh and her counsel appeal from a judgment denying their claim
for legal fees for work performed in a tort action to recover from third parties money
that was ultimately reimbursed to Pacific Holding Company Employee Welfare Benefit
Plan (the "Plan"). We reverse the district court and remand for the determination of
whether an attorney's fee is appropriate in the circumstances of this case and, if so,
what its amount should be.
I.
This case arises from an auto accident that left Ms. McIntosh's daughter gravely
injured. The daughter's medical expenses, exceeding $500,000, were covered under
the Plan, which was governed by the Employee Retirement Income Security Act, see
29 U.S.C. §§ 1001-1461. The Plan contract included fairly standard language as to
both subrogation and reimbursement rights, but was silent on the subject of attorney's
fees. Ms. McIntosh, acting through her attorney, who was hired on a contingency
basis, initiated two actions against the tortfeasor, one for herself and one for her
daughter. She ultimately settled with two insurance companies for a total of about
$250,000, and the suits against the tortfeasor, who was determined to be judgment-
proof, were dismissed.
Ms. McIntosh then sued the Plan in federal court seeking a declaratory judgment
that the Plan had no reimbursement right to the $250,000. This action did not catch the
Plan unaware, because the parties had exchanged correspondence outlining their views
on what their respective rights were to any recovery from a third party. The Plan,
indeed, had notified the relevant insurance companies by letter of its opinion that any
payment to Ms. McIntosh would not relieve them of liability to the Plan, and so the
insurance companies paid the settlement into escrow. We ultimately upheld the Plan's
right to reimbursement. See McIntosh v. Pacific Holding Co., 992 F.2d 882, 885 (8th
Cir. 1993), cert. denied, 510 U.S. 965 (1993).
In the present action, the plaintiffs seek an award of part of the settlement
amount as attorney's fees. The district court denied the claim.
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II.
We have recently decided a case that we believe governs the one before us. In
Waller v. Hormel Foods Corp., Nos. 96-2080/2231, slip op. at 8 (8th Cir. July 17,
1997), we held that federal common law gives an action for attorney's fees in
circumstances like the present ones, and in an amount equal to "the value of [the
claimant's] legal services to the Plan" (emphasis in original). The district court
therefore erred in holding that, as a matter of law, no such fee was available.
The plaintiffs argue in the first instance that the attorney should receive the fee
provided for in the contingency contract between Ms. McIntosh and her attorney. But
as we noted in Waller, slip op. at 9, this would be appropriate only if the plaintiffs can
show that the Plan would have made the same arrangement that Ms. McIntosh did if
it had itself engaged a lawyer to pursue a case against the tortfeasor. In the absence of
such a showing, the award should be "based on counsel's actual time devoted to the
matter." Id. Of course, time devoted to Ms. McIntosh's efforts to defeat the Plan's
subrogation rights is not compensable.
In the present case, the Plan asserts that the relevant insurance companies were
willing to settle for the policy limits before, or soon after, the litigation against them
was begun. If that is so, that fact becomes a relevant datum in determining the
appropriate amount of the fee. Because the district court has made no findings on these
and other factual matters that may become relevant to the matter of deciding on a
proper fee, we must remand the case for further proceedings.
III.
For the reasons indicated, we reverse and remand for further proceedings not
inconsistent with the principles outlined in this opinion.
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A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
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