Eileen M. Huss v. IBM Medical and D

In the

United States Court of Appeals

For the Seventh Circuit

Nos. 10-1061 & 10-2749

E ILEEN M. H USS, individually and as

Guardian for JOSEPH R. H USS, JR.,

Plaintiff-Appellee,

v.

IBM M EDICAL AND D ENTAL P LAN and

R. A. B ARNES, in her capacity as

Plan Administrator,

Defendants-Appellants.

Appeals from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 07 C 7028—James B. Zagel, Judge.

A RGUED N OVEMBER 30, 2010—D ECIDED A PRIL 13, 2011

Before K ANNE, W ILLIAMS, and T INDER, Circuit Judges.

K ANNE, Circuit Judge. Eileen Huss, who recently retired

from International Business Machines Corporation

(“IBM”), sought to enroll her dependent adult child,

Joseph Huss, in the IBM Medical and Dental Plan (the

2 Nos. 10-1061 & 10-2749

“Plan”). The Plan’s administrator, R. A. Barnes, found

Joseph ineligible under the Plan’s governing documents

and denied his enrollment. Huss sued Barnes and the Plan

(the “Defendants”) under the Employee Retirement

Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001

et seq. The district court found that Barnes’s decision

was arbitrary, capricious, and unreasonable. It granted

Huss’s motion for summary judgment, having deter-

mined that Joseph was entitled to be enrolled in the

Plan immediately. The district court also imposed

statutory penalties on the Defendants for their failure

to abide by ERISA’s document-disclosure obligations.

The district court then awarded attorney’s fees to Huss

under ERISA’s fee-shifting provision. Barnes and the

Plan appealed each of the district court’s decisions.

We affirm in part and vacate in part. Because Barnes

based her denial on the incorrect Plan document, her

decision was unreasonable. Yet the record does not

compel the conclusion that Joseph was entitled to en-

rollment. We therefore vacate the district court’s judg-

ment awarding benefits and remand the case with in-

structions to return it to Barnes and the Plan for

further consideration. We also reverse a portion of the

district court’s statutory penalties award because some

of the documents for which the penalty was imposed

do not fall within ERISA’s disclosure requirements. In

light of these holdings, we vacate the attorney’s fees

award and remand for redetermination by the district

court in the first instance.

Nos. 10-1061 & 10-2749 3

I. B ACKGROUND

Huss retired from IBM on December 31, 2006. IBM

provides medical and disability insurance benefits to

its active and retired employees through the Plan. The

Plan’s program of benefits is governed by ERISA. The

Plan was administered by Barnes, who had the ulti-

mate authority and discretion to make final deci-

sions regarding the eligibility of employees and their

relatives under the Plan.

Huss has an adult son, Joseph, who was born on

August 8, 1981. Due to a congenital mental disability,

Joseph is and always has been dependent upon his

parents for care and support. Joseph had been enrolled in

the Plan from birth until age sixteen, at which time he

was enrolled in his father’s health plan.

Because she intended to re-enroll Joseph in the Plan

upon her retirement, Huss wanted to make sure that

Joseph would be covered under the Plan at that time.

Huss contacted the Plan’s Customer Service Center in

late 2005, explaining Joseph’s circumstances and asking

Customer Service Specialists what she needed to do

to enroll Joseph in the Plan when she retired. Various

specialists told Huss during multiple calls that Joseph

would be eligible for enrollment and that she did not

need to take further action until her retirement.

Yet in January 2007, Customer Service Specialist Todd

Rogers told Huss that Joseph was ineligible for

enrollment in the Plan. According to Rogers, the Plan

documents required Huss to have submitted a written

application before June 9, 2004—at least sixty days before

4 Nos. 10-1061 & 10-2749

Joseph’s twenty-third birthday—to now be able to

enroll Joseph in the Plan.

Huss emailed Rogers requesting a summary of the

Plan, the policy language involving adult child eligibility

for the Plan, and any associated materials. Rogers re-

sponded on the same day, saying that the only available

document was the 2006 Summary Plan Description

(“SPD”) that Huss had already received. Rogers then

spoke with Huss a week later and told her the 2006 SPD

was the only document she needed if she wanted to

appeal Joseph’s exclusion from the Plan. Huss responded

by requesting the Plan language that would have been

in effect in 2004, as that would have been the controlling

language at the time Joseph turned 23. Rogers’s email

response stated that there was no such policy or

contract information to send.

Huss then retained counsel to assist her in her appeal.

On March 27, 2007, her counsel sent Barnes a written

request for further review of the enrollment denial. That

letter also asked for the previously requested Plan lan-

guage and all documents for the Plan in effect in 2004,

2005, 2006, and 2007. Barnes denied Joseph’s enroll-

ment in a response letter dated April 26, 2007: “In order

to enroll Joseph in IBM benefit coverage, the Over Age 23

Disabled Child Application had to be submitted to the

IBM Employee Services Center no less than 60 days

prior to Joseph reaching age 23.” This denial was

based upon the language in the 2006 SPD. The letter

was accompanied by some of the additional docu-

ments requested by Huss’s counsel, including the 2003

Nos. 10-1061 & 10-2749 5

SPD in effect 60 days before Joseph’s twenty-third birth-

day.

Huss—through her counsel—submitted her final

appeal to the Defendants on June 12, 2007. She based

her arguments on the 2003 SPD. Barnes again denied

Huss’s appeal, finding that the 2006 SPD controlled

the determination. According to Barnes, the 2006 SPD

clearly indicated both that Huss must have re-

quested continuation of coverage before Joseph had

turned twenty-three and also that Joseph must have

been enrolled at that time for coverage to be continued.

Because Huss had not requested coverage for Joseph

until after he was twenty-five, Barnes found Joseph

ineligible for enrollment. Barnes also noted that, despite

any Customer Service Specialist’s contrary representa-

tions, the Plan documents would control Joseph’s eligi-

bility.

Huss believed that the SPD language in effect on June 9,

2004, should have controlled the determination. That

language would have required only a request by phone,

as opposed to a written request for coverage extension.

Accordingly, Huss sued the Plan and Barnes under

ERISA’s civil enforcement provision in the United States

District Court for the Northern District of Illinois. Her

amended complaint sought an award of benefits for

her son under 29 U.S.C. § 1132(a)(1)(B) (Count I) and

statutory damages for the Defendants’ failure to provide

requested documents as required by 29 U.S.C. § 1024(b)(4)

(Count II). In the proceedings below, Huss testified

that she had called and inquired about Joseph’s con-

6 Nos. 10-1061 & 10-2749

tinued eligibility at least once and likely on multiple

occasions prior to June 9, 2004. IBM could neither verify

nor refute any of those phone calls because it had not

retained records of its employees’ conversations from

that long ago.

The district court granted Huss’s motion for sum-

mary judgment on both counts. It found that Barnes’s

decision to deny Joseph enrollment in the Plan was arbi-

trary and capricious and that Joseph was entitled to

immediate enrollment in the Plan. The district court also

assessed statutory penalties against the Defendants in

the amount of $15,200 for failing to timely turn over

Plan documents Huss had requested in writing. In a post-

judgment order, the district court awarded attorney’s

fees and non-taxable expenses to Huss in the amount

of $86,906.04 under 29 U.S.C. § 1132(g)(1).

The Defendants timely appealed the district court’s

judgments on Counts I and II. Following the district

court’s post-judgment order, the Defendants again ap-

pealed to challenge the attorney’s fees award. We have

consolidated the appeals here.

II. A NALYSIS

Barnes and the Plan present three issues on appeal. First,

they contend that the district court erred by concluding

that their decision to deny Joseph enrollment in the

Plan was arbitrary, capricious, and unreasonable. Second,

they contend that the district court abused its discretion

by assessing statutory penalties against them for their

Nos. 10-1061 & 10-2749 7

putative failure to produce documents according to

their ERISA obligations. Third, they contend that the

district court abused its discretion by awarding attor-

ney’s fees to Huss despite their litigation position being

substantially justified. We will address each issue in turn.

A. Review of Enrollment Denial

We review the district court’s grant of summary judg-

ment de novo. Holmstrom v. Metro. Life Ins. Co., 615 F.3d

758, 766 (7th Cir. 2010). We examine the record and con-

trolling law anew while applying the same standards the

district court was bound to apply. Swaback v. Am. Info.

Techs. Corp., 103 F.3d 535, 540 (7th Cir. 1996). As in other

contexts, summary judgment in an ERISA case is proper

only if no genuine issue of material fact appears upon

review of the administrator’s decisions. Sellers v. Zurich

Am. Ins. Co., 627 F.3d 627, 631 (7th Cir. 2010).

The parties agree that the Plan’s clear language vests

its administrator with the discretion to construe policy

terms and to make final eligibility determinations.

Barnes’s decision to deny Joseph’s enrollment in the

Plan was premised on her interpretation of the Plan’s

requirements for the eligibility and enrollment of adult

children. Accordingly, we apply an arbitrary and capri-

cious standard of review to the administrator’s determina-

tion. See id. The administrator’s decision will not be dis-

turbed if “(1) it is possible to offer a reasoned explanation,

based on the evidence, for a particular outcome, (2) the

decision is based on a reasonable explanation of relevant

plan documents, or (3) the administrator has based its

8 Nos. 10-1061 & 10-2749

decision on a consideration of the relevant factors that

encompass the important aspects of the problem.” Ponsetti

v. GE Pension Plan, 614 F.3d 684, 691 (7th Cir. 2010)

(quoting Williams v. Aetna Life Ins. Co., 509 F.3d 317, 321-22

(7th Cir. 2007)).

The Defendants argue that the district court failed to

give due deference to their decision regarding Joseph’s

eligibility for enrollment in the Plan. But deference to

plan administrators does not require us to surrender our

role as reviewers and rubber stamp their decisions. See

Speciale v. Blue Cross & Blue Shield Ass’n, 538 F.3d 615, 621

(7th Cir. 2008). Where an administrator’s interpretation of

a plan’s language defies common sense, courts must

overturn the decision as being “downright unreasonable.”

Dabertin v. HCR Manor Care, Inc., 373 F.3d 822, 828 (7th

Cir. 2004). Ultimately, if Barnes based her decision to

deny Joseph’s enrollment on an interpretation that con-

troverted the plain meaning of the Plan, her actions

were arbitrary and capricious. Swaback, 103 F.3d at 540.

1. Determination of the Controlling Plan Version

The Defendants acknowledge that their denial decision

was based on the 2006 SPD, which reflected the Plan’s

language that was in effect when Huss, upon her retire-

ment, attempted to enroll Joseph in the Plan. Huss

argues that the 2003 SPD, which contained the Plan

language in effect on June 9, 2004, should have governed

her application for benefits, especially given that Rogers

indicated she had to have acted prior to that date to

Nos. 10-1061 & 10-2749 9

enroll Joseph. Each SPD may have required a Plan par-

ticipant to act at least sixty days prior to her adult child’s

twenty-third birthday in order to ensure continued eligi-

bility for enrollment—an issue that we will discuss

later. But the two SPDs diverged in one important sense:

the 2006 SPD required a written application to re-

quest continuation, while the 2003 SPD only required

the participant to call the Customer Service Center to

make the request.

The Defendants cite Hackett v. Xerox Corp. Long-Term

Disability Income Plan, 315 F.3d 771 (7th Cir. 2003), in

support of their argument that the 2006 SPD controlled.

In Hackett we held that “absent any language sug-

gesting ambiguity on the vesting question, the con-

trolling plan must be the plan in effect at the time the

benefits were denied.” Id. at 774. But the issue in

Hackett involved determining which of two sequential

plans was applicable in the context of a plan administra-

tor’s decision to terminate Hackett’s benefits. Id. at 773-

74. We noted that Hackett’s rights to benefits had not

vested prior to the enactment of the new plan language

and that his employer was therefore able to change

the plan, so we concluded that “the controlling plan will

be the plan that is in effect at the time a claim for

benefits accrues.” Id. at 774.

Despite Hackett’s sweeping language, we are uncon-

vinced that the case supports the Defendants’ position.

Huss has not, for example, challenged an administrator’s

rejection of a claim for health benefits allegedly owed

her for medical treatment she received in 2006. Rather,

10 Nos. 10-1061 & 10-2749

she challenges the Defendants’ decision to deny Joseph’s

enrollment based on her failure to fulfill a putative condi-

tion precedent that sprang into existence after her

window of opportunity to meet the condition closed in

2004. Hackett does not stand for the proposition that ERISA

plan administrators can avoid providing coverage for

participants by grafting already-insurmountable con-

ditions precedent into superseding plan documents.

Accord Dabertin, 373 F.3d at 831 (“[T]he Committee im-

posed new requirements on Plan participants that were

not part of the plain language of the Plan. An ERISA

benefit cannot be a moving target where the plan ad-

ministrator continues to add conditions precedent to

the award of benefits.”) (internal citation omitted);

Swaback, 103 F.3d at 542 n.14 (“Where the Trustees impose

a standard not required by the pension plan itself, . . . such

action would result in an unwarranted and arbitrary

construction of the plan.”) (quoting Morgan v. Mullins,

643 F.2d 1320, 1321 (8th Cir. 1981)).

We agree with the very able district judge that “[t]he

nature of the dispute dictates whether the plan admin-

istrator must turn to an earlier version of an SPD.” Huss v.

IBM Medical and Dental Plan, 2009 WL 780048, at *7 (N.D.

Ill. Mar. 20, 2009). We hold that if a plan participant’s

application for benefits is denied for her failure to fulfill

a condition precedent to her eligibility for benefits, the

operative plan language is the language that was in

effect at the time the opportunity to fulfill the con-

dition precedent expired. In order for the Defendants’

denial decision to be reasonable, then, they must have

based their final decision on the Plan language in effect

Nos. 10-1061 & 10-2749 11

at the time Huss purportedly failed to meet the necessary

condition. Given that any such condition must have

been fulfilled no later than June 9, 2004, the 2003 SPD

language controls this dispute.

Because Barnes acknowledges that her denial decision

was based on the 2006 SPD language—that is, on Huss’s

failure to file a written application—Barnes acted in an

arbitrary and capricious manner by failing to consider

the relevant document in her decision. See Speciale, 538

F.3d at 621 (noting that administrators’ decisions must

be based on a reasonable explanation of relevant plan

documents in order to be upheld). It was unreasonable

for the Defendants to deny Joseph’s enrollment in the

Plan merely for Huss’s failure to fulfill a condition that

did not exist on the critical date.

We pause at this point to briefly address the Defendants’

ancillary argument that the district court erred by con-

sidering the 2003 SPD because it should have limited

its review of Huss’s claim to the information considered

by the Defendants when denying Huss’s application.

Because Barnes based her decision upon the 2006 SPD

alone, they allege its consideration of the 2003 SPD was

erroneous. This argument is without merit. Plan admin-

istrators may not insulate controlling plan documents

from reviewing courts’ consideration by deliberately

ignoring them. Giving effect to the Defendants’ argument

would legitimize the very arbitrary and capricious

decision-making ERISA condemns.

12 Nos. 10-1061 & 10-2749

2. Outcome under the 2003 SPD

The Defendants argue that the question of whether the

2003 or 2006 SPD controls is immaterial because Huss’s

application was rightfully denied under either. The

parties acknowledge that Joseph was enrolled in the

Plan at one time, that he was disenrolled to join his

father’s health plan, and that he would be allowed re-

enrollment later if all eligibility criteria were met. The

parties agree that a Plan participant’s child only

remains eligible for participation in the Plan until the

age of twenty-three, unless the child meets four criteria

to qualify as an eligible mentally disabled adult. The

parties also agree that Joseph always met and continues

to meet those four exception criteria. The parties

disagree, however, on two fundamental points. First,

they dispute whether eligibility to enroll after the age

of twenty-three is conditioned upon the parent partici-

pant’s request to continue the adult child’s eligibility.

Second, they dispute whether Huss met the request

obligation if it exists. We examine each in turn.

The 2003 SPD states that “[e]ligible individuals will

receive coverage under the IBM Medical and Dental

Benefits Plan only if and while enrolled for coverage.”

Accordingly, for Joseph to receive any benefits, he must

be enrolled in the Plan. The Plan also allows participants

to change their minds regarding year-to-year enroll-

ment of family members, provided the family members

Nos. 10-1061 & 10-2749 13

remain eligible.1 It is clear that both enrollment and

receipt of benefits are dependent upon an individual’s

eligibility for coverage.

Unfortunately, the SPD introduces some ambiguity

through poor word choice in section 3.1.1.4 of the 2003 SPD

(emphasis added): “A child who was eligible under the

plans immediately before reaching age 23 . . . and who,

but for having reached age 23 would still be eligible, will

be eligible to enroll upon attainment of age 23 . . . and

thereafter to remain continuously eligible to enroll beyond

the age of 23 if, at the time the child enrolls” he meets the

four mental disability criteria. The italicized language

might, at first blush, suggest that a disabled adult’s

eligibility continues beyond his twenty-third birthday

without any act by the Plan participant.

The following two paragraphs cast serious doubt on

that assumption. The first reads:

If you think your child will meet the above criteria

at age 23, you must request continuation of IBM

1

The 2006 SPD explicitly states: “Please note, you may opt out

or waive coverage for your dependent child one year and

re-enroll your child during the next or subsequent annual

enrollment period as long as they continue to meet the

eligibility criteria.” Although the 2003 SPD does not contain

this quotation in any section, the point could be inferred from

a statement in section 2.1: “Each year, during an enrollment

period usually held in the fall, you will have the opportunity

to elect coverage for yourself and any other eligible family

members you wish to enroll for the upcoming plan year. . . .”

(emphasis added).

14 Nos. 10-1061 & 10-2749

health benefits at least 60 days before his or her

23 [sic] birthday. To do so, call the Employee

Services Center. If you are a newly hired employee

with a disabled child who has already reached

age 23 at the time your employment begins, you

should call to request this coverage within 60 days

of your date of hire.

This language clearly shows that if a disabled adult child

is enrolled and receiving benefits, those benefits will

terminate at age twenty-three unless the participating

employee requests continuation. It could also imply that

a continuation request is likewise required to extend

enrollment eligibility. That implication is strongly rein-

forced by the requirement that new employees must

request coverage for disabled adult children within

sixty days, as well as by the succeeding paragraph:

Any determination that a child qualifies for eligi-

bility beyond age 23 will be reviewed periodically.

Once any of the four conditions is not met by

a child beyond the age of 23, coverage will be

discontinued and will not be reinstated, even if

later the child again meets all or any of the four

conditions.

This paragraph indicates that eligibility beyond age

twenty-three is conditioned upon a determination that

the child meets the established criteria. It also shows

that adult children discontinuing receipt of benefits, but

later meeting the criteria, will nevertheless be ineligible

for re-enrollment. These provisions undermine the

premise that eligibility continues automatically for dis-

abled adult children who are not already enrolled.

Nos. 10-1061 & 10-2749 15

Huss chooses to read the language most favorable to

her in isolation: “If you think your child will meet the

above criteria at age 23, you must request continuation

of IBM health benefits at least 60 days before his or her

23 [sic] birthday.” Huss argues that the 2003 SPD there-

fore did not impose an application requirement to

preserve Joseph’s continued eligibility for enrollment

under the Plan, but rather imposed a requirement only

to request a continuation of benefits. Because Joseph was

not already enrolled, her argument posits, the request

requirement did not apply to him. She therefore con-

cludes that Joseph remains eligible for enrollment

during any annual enrollment period.

We are convinced that the provisions we have quoted,

when read in their full context, illustrate the Plan’s struc-

ture of making coverage available to disabled adult

children of Plan participants provided that the partic-

ipants arrange for such coverage prospectively. This

is not a case where the Plan is devoid of latent

ambiguities “once its real-world setting is understood,”

such that no careful administrator could have deter-

mined that a request is necessary to extend eligibility for

enrollment. Orth v. Wis. State Emps. Union Counsel 24, 546

F.3d 868, 872, 875 (7th Cir. 2008). Granted, the inherent

ambiguity of the Plan’s language could conceivably

give rise to an unusual loophole Huss seeks to employ:

unenrolled adult children of long-standing employees

may be enrolled at any time in their adulthood, but

already-enrolled adult children and the adult children

of new employees must meet a stringent timeline or be

16 Nos. 10-1061 & 10-2749

ineligible for coverage. But we doubt the drafters of

the Plan intended this strained result.

Regardless, it is because of such ambiguities in ERISA

plans that we defer to administrators who are granted

interpretive discretion in the plan documents. See Hess

v. Reg-Ellen Mach. Tool Corp., 423 F.3d 653, 662 (7th Cir.

2005). Huss argues that the Defendants failed to give

any weight to how IBM’s own Customer Service Spec-

ialists had interpreted the Plan to permit Joseph’s enroll-

ment. But the Plan vests interpretive discretion in Barnes,

not the Specialists—or the courts. See Dabertin, 373 F.3d at

833 (“[W]e cannot merely apply federal common law

principles of contract interpretation, but rather must

view the contractual ambiguity through a lens that gives

broad discretion to the plan administrator to interpret

the plan.”). Given her range of discretion, it would not be

downright unreasonable for Barnes to conclude that

an employee must take action within sixty days of a

disabled adult dependent’s twenty-third birthday to

secure continued eligibility for enrollment beyond the

age of twenty-three.

We turn then to the question of whether Huss took

sufficient action before June 9, 2004, to ensure Joseph’s

continued eligibility for enrollment. We have already

held that the 2003 SPD controls in the present case. We

next need to determine if the record supports a conclu-

sion that Huss timely called the Customer Service

Center to request extended eligibility for enrollment.

In an affidavit submitted to the district court, Huss

averred that she regularly contacted the Plan’s repre-

Nos. 10-1061 & 10-2749 17

sentatives to inquire about benefits and eligibility before

June 9, 2004. (Huss Aff. ¶ 13) Regarding calls she made

in 1998 while considering transferring Joseph to his

father’s health plan, Huss wrote,

I am almost certain I would have confirmed with

the IBM Plan at that time that I would have the

ability to re-enroll Joseph in the IBM Plan during

a subsequent open enrollment period. . . . It is

probable that I would have expressed my contin-

ued interest in preserving Joseph’s eligibility for

lifetime benefits.

(Id. at ¶ 14) She also argues that neither Barnes nor any

Customer Service Representative checked to see if she

had contacted the Plan to request continued eligibility

for Joseph. The Defendants have not argued that Huss

never made such a phone call, as IBM has not retained

Customer Service Center phone records from that pe-

riod. Instead, the Defendants note that Huss “cannot

recall a specific conversation with an IBM Plan em-

ployee prior to August 2004 in which [she] specifically

said [she] wanted to be sure Joseph could continue to

remain eligible for benefits after he turned age 23.” (Id. at

¶ 12) Rather, she merely stated that “it is probable that

[she] discussed Joseph’s continued eligibility at some

time during or prior to June of 2004.” Id. They also

argue that the district court improperly considered the

affidavit because the information in it was not con-

sidered by Barnes, making it not part of the administra-

tive record.

The district court did not premise its conclusion that

Huss was entitled to immediately enroll Joseph in the

18 Nos. 10-1061 & 10-2749

Plan on Huss having called to request an extension.

Instead, the district court held that such a request was not

required in Joseph’s circumstances because he was not

already enrolled in the Plan. As noted above, we respect-

fully disagree with that conclusion by the learned dis-

trict judge.

Given the uncertainty of Huss’s testimony and the fact

that the Defendants—because they were applying the

incorrect SPD language—did not consider any evidence

of Huss’s calls before June 9, 2004, a genuine issue of

material fact persists as to whether Huss qualifies for the

relief she seeks. Courts should rule directly in the claim-

ant’s favor rather than remanding the case to the plan

administrator only in the rare case where the record

“contains such powerfully persuasive evidence that the

only determination the plan administrator could rea-

sonably make” is in the claimant’s favor. Majeski v. Met.

Life Ins. Co., 590 F.3d 478, 484 (7th Cir. 2009). As we do

not believe this to be one of those rare cases, the

parties should fully develop the record and appro-

priately examine the evidence at the administrative level

in the first instance. See Holmstrom, 615 F.3d at 778. The

appropriate remedy is to remand the case to the Plan

administrator for further proceedings in accordance

with this opinion.

B. Award of Statutory Penalties

The Defendants also appeal the district court’s imposi-

tion of statutory penalties due to their delay in providing

Huss with documents she requested. ERISA imposes

Nos. 10-1061 & 10-2749 19

an obligation on plan administrators to provide partici-

pants, upon written request, with specific information:

“The administrator shall . . . furnish a copy of the latest

updated summary[] plan description, and the latest

annual report, . . . or other instruments under which

the plan is established or operated.” 29 U.S.C. § 1024(b)(4).

The disclosure provision enables participants and benefi-

ciaries to know where they stand with respect to the plan,

including knowing the procedures they must follow

to secure benefits. Mondry v. Am. Family Mut. Ins. Co.,

557 F.3d 781, 793 (7th Cir. 2009). ERISA provides for en-

forcement of the disclosure obligation by authorizing

reviewing courts to impose penalties on reticent admin-

istrators. Administrators who do not “comply with a

[1024(b)(4) request] . . . by mailing the material

requested . . . within 30 days after such request may in the

court’s discretion be personally liable to such participant

or beneficiary in the amount of up to [$110] a day

from the date of such failure or refusal.” 29 U.S.C.

§ 1132(c)(1)(B).2

1. Standard of Review

We review an assessment of statutory penalties for

abuse of discretion. Fenster v. Tepfer & Spitz, Ltd., 301

F.3d 851, 858 (7th Cir. 2002). The district court has discre-

tion both as to the assessment of a penalty and as to the

2

The Secretary of Labor administratively increased the maxi-

mum penalty under this statute to $110 per day (from the

original $100 per day). 29 C.F.R. § 2575.502c-1.

20 Nos. 10-1061 & 10-2749

size of any penalty assessed (up to the regulatory maxi-

mum). Ziaee v. Vest, 916 F.2d 1204, 1210 (7th Cir. 1990).

Before a court may impose penalties, the administrator

must have actually flouted its obligations—that is, it must

have failed to timely send the documents in response to

a valid request, and the documents requested must fall

within the scope of the statute. 29 U.S.C. § 1024(b)(4);

Kleinhans v. Lisle Sav. Profit Sharing Trust, 810 F.2d 618,

622 (7th Cir. 1987); see also Ames v. Am. Nat’l Can Co.,

170 F.3d 751, 758-59 (7th Cir. 1999) (“If it had meant to

require production of all documents relevant to a plan,

Congress could have said so.”). And even if those neces-

sary criteria are met, a fine is not mandatory. Fenster,

301 F.3d at 858. Reviewing courts consider multiple

factors to determine what size penalty, if any, is appro-

priate. These factors include: prejudice to the participant

caused by the delay, see Mondry, 557 F.3d at 806; injury

to the participant, see Ziaee, 916 F.2d at 1210; the number

of requests made by the participant, id. at 1211; the ad-

ministrator’s bad faith or egregious conduct, see Kleinhans,

810 F.2d at 622; the length of and explanation for the delay,

see Krueger Int’l, Inc. v. Blank, 225 F.3d 806, 810-11 (7th

Cir. 2000); the administrators’ lack of resources to comply

with the request, see Lowe v. McGraw-Hill Cos., 361 F.3d

335, 338 (7th Cir. 2004); the nature of the documents

withheld, see Kamler v. H/N Telecomm. Servs., Inc., 305 F.3d

672, 683 (7th Cir. 2002); and particular combinations of

these factors, Leister v. Dovetail, Inc., 546 F.3d 875, 883-

84 (7th Cir. 2008).

In this case, the district court assessed statutory

penalties against the Defendants for their failure to

Nos. 10-1061 & 10-2749 21

comply with two of Huss’s document requests. Pursuant

to 29 U.S.C. §§ 1024(b)(4) and 1132(c)(1)(B), the district

court imposed a statutory penalty of $3,780 for failure

to comply with the first request and $11,440 for the

second. We address each assessment separately.

2. First Statutory Penalty

In an email dated January 23, 2007, Huss asked the

Defendants to send her the 2003 SPD. This request was

founded on Customer Service Representative Rogers’s

statement that Huss needed to have acted prior to June 9,

2004. The 2003 SPD contained the Plan language in

effect on that critical date. The Defendants sent the

2003 SPD to Huss only after sixty-three days.

We find no error in the first award. We have already

determined that the 2003 SPD controls Huss’s applica-

tion. Accordingly, the 2003 SPD Huss requested was

undoubtedly an “instrument[] under which the plan

[was] established or operated” and therefore subject to

section 1024(b)(4)’s disclosure obligation. The Defendants

did not provide the document within the statute’s

allotted thirty days. Further, the 2003 SPD was critically

important to Huss in her administrative appeal. Given

that the document’s language should have guided the

Defendants’ determination in the first instance and in

the administrative appeal, even the relatively brief sixty-

three-day delay was likely prejudicial or injurious to

Huss. In addition, the Defendants rebuffed Huss’s

request by suggesting that only the 2006 SPD was

relevant in her appeal and by representing that no

22 Nos. 10-1061 & 10-2749

policy information from that time was available.

The district court did not abuse its discretion in assessing

a $60-per-day penalty against the Defendants for this

failure to comply with ERISA’s disclosure requirement.

Accordingly, we affirm the first penalty assessment of

$3,780.

3. Second Statutory Penalty

Via her attorney’s letter dated March 27, 2007, Huss

requested copies of nine additional SPDs that were pub-

lished between June 9, 2004, and the date of the letter.

She sought to determine the evolution of the purported

condition precedent to extending Joseph’s enrollment

eligibility. The Defendants fulfilled this second request

only after 104 days.

The district court ruled that the 2004-2007 SPDs fell

within the scope of ERISA’s disclosure obligation because

they were “material to an evaluation of the claimant’s

rights.” Huss, 2009 WL 780048, at *10. It also held

that “common sense confirms that if an earlier version of

an SPD is germane to evaluating a claimant’s rights,

section 1024(b)(4) encompasses those earlier SPDs.” Id.

The court found bad faith in the Defendants’ continued

misrepresentations regarding the relevance and avail-

ability of historical documents, noted the number of

documents in the request, and found that the 104-day

delay was “undeniably egregious.” Without any further

discussion of prejudice to Huss resulting from the

failure to disclose, the district court imposed the maxi-

mum penalty allowable—$110 per day.

Nos. 10-1061 & 10-2749 23

We find the district court’s reasoning as to the second

assessment less convincing. We review the assessment

only for an abuse of discretion, but it is always an abuse

of discretion for a district court to erroneously apply the

law or to base its holding on clearly erroneous character-

izations of the evidence. Gastineau v. Wright, 592 F.3d

747, 748 (7th Cir. 2010). Before a court may impose a

penalty pursuant to section 1132(c)(1), “the participant

must establish (1) that the administrator was required

by ERISA to make available to the participant the infor-

mation the participant requested, and (2) that the partici-

pant requested and the administrator failed or refused

to provide the information requested.” Kleinhans, 810

F.2d at 622. The propriety of the second penalty in this

case turns on the first criterion. We need to determine,

therefore, “how broadly we should construe the catch-all

part of § 1024(b)(4), which requires disclosure of ‘other

instruments under which the plan is established or oper-

ated.’ ” Ames, 170 F.3d at 758.

In Ames, we held that § 1024(b)(4)’s disclosure obliga-

tion “extends only to a defined set of documents,” id. at

759, and does not comprehend every document that may

be relevant to the administration of a plan, id. at

758. Documents that may prove beneficial to plan partici-

pants when developing their litigation positions might

be available in civil discovery, but might nevertheless

remain outside of the statutory confines of ERISA’s dis-

closure obligations. Id. at 759. “[T]he universe of docu-

ments that qualify as ones under which the plan is estab-

lished or operated . . . is small and is limited to

24 Nos. 10-1061 & 10-2749

those documents that formally, i.e., legally, govern the

establishment or operation of the plan.” Mondry, 557

F.3d at 801 (internal quotation marks omitted).

We conclude that, as in Ames, the documents at the

base of the second penalty in this case do not fall within

the scope of section 1024(b)(4). During her appeal, Huss

was already aware that the language in effect on the

critical date did not contain any written-request require-

ment. The sequence and timing of the requirement’s

evolution may have been illuminating, but could not

have been critical to Huss’s evaluation of her rights. The

Defendants here relied on the 2006 SPD to deny Huss’s

application, and we have held that the 2003 SPD

should control. The Defendants did not rely on any of

the interim documents in denying Huss’s applica-

tion, which would have brought them within section

1024(b)(4)’s purview. See Mondry, 557 F.3d at 801.

Huss concedes that “[u]nder the circumstances, the

[2003 SPD] is the only controlling plan document,” but

argues that “the intervening iterations of the SPD are

additional relevant documents under which the IBM

Plan ‘is established or operated.’ ” (Appellee’s Br. at 41

(citing Ames, 170 F.3d at 759)) But Ames plainly held that

not every document relevant to a plan is within ERISA’s

disclosure obligation. Ames, 170 F.3d at 758-59. And we

have previously held that superseded plan descriptions

do not fall into the categories of documents administrators

must provide to inquiring participants. Shields v. Local

705, Int’l Bhd. of Teamsters Pension Plan, 188 F.3d 895, 903

(7th Cir. 1999). We see no principled basis on which to

Nos. 10-1061 & 10-2749 25

hold that the documents comprising Huss’s second

request—documents adopted after the controlling SPD,

then superseded, and never referenced or relied upon

by the Defendants—constitute “the latest updated sum-

mary, plan description, . . . or other instruments under

which the plan is established or operated.” 29 U.S.C.

§ 1024(b)(4). While Huss may have been entitled to

these documents during discovery in the course of her

district court review, see Ames, 170 F.3d at 759, she was

not entitled to automatic disclosure of these documents

within thirty days of her request. Accordingly, the

district court abused its discretion by assessing a penalty

against the Defendants for their delay in sending the

second set of requested documents.3 We vacate the

3

Even if these documents fell within section 1024(b)(4)’s

purview, the assessed penalty may still have constituted an

abuse of discretion. Prejudice is not a requisite to recovery,

Mondry, 557 F.3d at 806, but we find no authority holding

that prejudice premised only on the hiring of an attorney and

time spent disputing a claim suffices for statutory penalties.

Further, there is no indication that Huss would not have

spent the same amount of time on and retained an attorney

to assist her in the appeal if the documents were timely sent.

Finally, the 104-day delay was not negligible, but is well

shy of delays previously found to justify lesser penalties.

E.g., Lowe, 361 F.3d at 337-39 (affirming award of $50 per day

for 731-day delay). It may push or exceed the limits of a

district court’s discretion to assess the maximum penalty given

the weak-to-negligible showing of prejudice and the length

(continued...)

26 Nos. 10-1061 & 10-2749

district court’s award of $11,440 in statutory penalties

to Huss.

C. Award of Attorney’s Fees

The Defendants’ last issue involves the district court’s

award of attorney’s fees to Huss on the basis that their

litigation position was not substantially justified. ERISA

provides that a district court “may allow a reasonable

attorney’s fee and costs of action to either party.” 29 U.S.C.

§ 1132(g)(1). We have identified a modest, but rebut-

table, presumption in favor of awarding fees to prevailing

parties in ERISA cases. Laborers’ Pension Fund v. Lay-Com,

Inc., 580 F.3d 602, 615 (7th Cir. 2009). We review a

district court’s award or denial of attorney’s fees for an

abuse of discretion. Holmstrom, 615 F.3d at 779.

We must first determine whether Huss is eligible for

an award of attorney’s fees. Rather than holding that

Huss is entitled to immediately enroll Joseph in the

Plan, we are remanding the case to the administrator for

further proceedings. In the past, this court held that a

claimant who secures a remand during district court

review of an administrator’s denial of benefits was “not a

prevailing party in the truest sense of the term” and was

therefore not entitled to attorney’s fees. See Quinn v. Blue

3

(...continued)

of delay in this case. The Defendants, however, appeal only

the fact of the penalty, not its amount. We therefore need not

and do not decide this issue today.

Nos. 10-1061 & 10-2749 27

Cross & Blue Shield Ass’n, 161 F.3d 472, 478-79 (7th Cir.

1998); Tate v. Long Term Disability Plan for Salaried Emps. of

Champion Int’l Corp. No. 506, 545 F.3d 555, 564 (7th Cir.

2008). But the Supreme Court recently clarified that

§ 1132(g)(1) does not limit attorney’s fees awards to a

“prevailing party”; rather, it affords district courts

the discretion to award fees to “either party.” Hardt

v. Reliance Standard Life Ins. Co., ___ U.S. ___, ___, 130

S. Ct. 2149, 2157-58 (2010). In doing so, the Court effec-

tively overruled our precedents preventing an ERISA

claimant from receiving attorney’s fees if her case is

remanded to the plan administrator. See Holmstrom, 615

F.3d at 766 n.6. The Supreme Court acknowledged, how-

ever, that a judge’s discretion is still somewhat limited,

holding that “a fees claimant must show some degree

of success on the merits before a court may award attor-

ney’s fees under § 1132(g)(1).” Hardt, ___ U.S. at ___, 130

S. Ct. at 2149 (internal quotation marks omitted).

In this case, Huss has achieved more than “trivial

success on the merits” or a “purely procedural victory.” Id.

(quoting Ruckelshaus v. Sierra Club, 463 U.S. 680, 688 n.9

(1983)). She has secured a reversal of the administrative

denial of benefits, a remand for further proceedings

involving a different controlling document, and the

imposition of a statutory penalty against the Defen-

dants. We easily conclude that this outcome represents

“some success on the merits,” Hardt, ___ U.S. at ___, 130

S. Ct. at 2149, enabling Huss to receive attorney’s fees

under section 1132(g)(1).

We next turn to our review of the actual award.

Even after an eligibility determination under Hardt, we

28 Nos. 10-1061 & 10-2749

still must consider whether an award of attorney’s fees

is appropriate. See Williams v. Metro. Life Ins. Co., 609

F.3d 622, 635 (4th Cir. 2010) (“[W]e conclude that once a

court in this Circuit determines that a litigant in an

ERISA case has achieved some degree of success on the

merits, the court should continue to apply the general

guidelines that we identified . . . when exercising its

discretion to award attorneys’ fees to an eligible party.”

(internal quotation marks omitted)); Simonia v. Glendale

Nissan/Infiniti Disability Plan, 608 F.3d 1118, 1119 (9th Cir.

2010) (“[T]he Supreme Court expressly declined to fore-

close the possibility that, once a court has determined

that a litigant has achieved some degree of success on the

merits, it may then evaluate the traditional five factors . . .

before exercising its discretion to grant fees.”). For an

award of attorney’s fees under § 1132(g)(1) to be appro-

priate, the court must find the non-prevailing party’s

litigation position was not substantially justified. Lowe,

361 F.3d at 339. A five-factor test may inform the

court’s analysis, see, e.g., Quinn, 161 F.3d at 478, but “the

factors in the test are used to structure or implement,

rather than to contradict, the ‘substantially justified’

standard . . . as the ‘bottom-line’ question to be answered.”

Lowe, 361 F.3d at 339. We therefore ask whether the De-

fendants’ litigation position was substantially justified

and taken in good faith or whether they were out to

harass Huss. See Herman v. Cent. States, Se. and Sw. Areas

Pension Fund, 423 F.3d 684, 696 (7th Cir. 2005).

The district court awarded Huss attorney’s fees and

related non-taxable expenses in the amount of $86,906.04.

Although the Defendants challenged the amount of the

Nos. 10-1061 & 10-2749 29

award below, on appeal they challenge only the fact of

the award and argue we must vacate it because their

position was substantially justified. The district court

analyzed Huss’s motion for attorney’s fees in two ways.

It first asked whether the Defendants’ position was sub-

stantially justified and taken in good faith. See, e.g.,

Herman, 423 F.3d at 696. For completeness, it then

applied the five-factor test, though it acknowledged

that the multi-factor test is disfavored in this circuit. See

Sullivan v. William A. Randolph, Inc., 504 F.3d 665, 671-72

(7th Cir. 2007). Under each analysis, the district court

found that the circumstances warranted awarding Huss

attorney’s fees and expenses.

We have found that the Defendants’ decision—requiring

Huss to have submitted a written application to extend

Joseph’s enrollment eligibility when such a requirement

did not exist on the critical date—was arbitrary and

capricious, thus requiring reversal and remand. But we

are hesitant to say their position was not substantially

justified and taken in good faith, especially in light of the

potentially ambiguous directives of our precedents. See,

e.g., Hackett, 315 F.3d at 774 (“[A]bsent any language

suggesting ambiguity on the vesting question, the con-

trolling plan must be the plan in effect at the time the

benefits were denied.”). The Defendants argue that the

district court’s determination of the applicable Plan

language was contrary to circuit precedent and that

Huss would not be entitled to benefits under the Plan

even if the 2003 SPD applied to their dispute. Their

first argument, while incorrect, was plausible; their

second argument had enough force to warrant our

30 Nos. 10-1061 & 10-2749

remand for further proceedings. A position need

not be meritorious to clear the “substantially justified”

threshold.

We also respectfully disagree with the district court’s

somewhat abrupt conclusion that the Defendants’ denial

of eligibility necessarily indicated bad faith. See Prod. &

Maint. Employees’ Local 504 v. Roadmaster Corp., 954

F.2d 1397, 1405 (7th Cir. 1992) (“[L]ack of explanation is

often sufficient in itself to constitute an abuse of discre-

tion where the reasons for a decision left unexplained are

not apparent from the record.”). The Defendants’ denial

may have been erroneous without being the result of

bad faith, and there was no indication that they

intended to harass Huss.

We would be hesitant to conclude that the Defendants’

position, though unsuccessful in significant part, was

so indefensible as to warrant an award of attorney’s fees

to Huss. See Harris Trust and Sav. Bank v. Provident Life

and Acc. Ins. Co., 57 F.3d 608, 617 (7th Cir. 1995). Never-

theless, we need not and do not decide whether the

district court abused its discretion in finding the Defen-

dants’ litigation position not substantially justified. As

we stated above, Huss has achieved some success on the

merits of her case and may therefore be entitled to

some portion of her attorney’s fees request. The Supreme

Court has held that “where the plaintiff achieved only

limited success, the district court should award only

that amount of fees that is reasonable in relation to the

results obtained.” Hensley v. Eckerhart, 461 U.S. 424,

440 (1983).

Nos. 10-1061 & 10-2749 31

Given that we have significantly altered the outcome

of the litigation below, and that the district court is in

the best position to determine any attorney’s fee award,

we choose to vacate the attorney’s fees and expenses

award. We remand the issue to the district court for

reconsideration in light of Hardt, Huss’s degree of

success on the merits, and our discussion and holdings

in this case.

III. C ONCLUSION

For the foregoing reasons, we V ACATE the district court’s

entry of summary judgment in favor of Huss on her

claim for benefits and R EMAND the case to the district

court with instructions to return the matter to IBM for

further proceedings consistent with this opinion. We

A FFIRM the district court’s imposition of a statutory

penalty on the Defendants in the amount of $3,780 for

failure to comply with Huss’s first request for Plan docu-

ments, but R EVERSE the statutory penalty imposed in

the amount of $11,440 for failure to comply with Huss’s

second request. We V ACATE the district court’s award

of attorney’s fees and other expenses and R EMAND the

matter to the district court for redetermination con-

sistent with this opinion.

4-13-11