A recent Legal Intelligencer story, “$567,000 in Attorney Fees Awarded in ERISA Case,” reports that a federal judge has awarded $567,000 in attorney fees to a lawyer working on an ERISA case that has been in court for over a dozen years.
Gretchen Hutto Castellano had asked the court for just over $1 million for her attorney, Ira B. Silverstein, which included an upward adjustment from the $807,000 initially requested because of the delay and extended nature of the litigation. Castellano's case revolved around her attempt to recover $750,000 from her deceased husband's life insurance policy held in a trust by the Regional Employers' Assurance League (REAL), referred to by the court as REAL.
U.S. Magistrate Judge Elizabeth T. Hey of the Eastern District of Pennsylvania acknowledged in her memorandum that the case had a "long and sordid" history, but cut the fee award nearly in half because of what she determined to be overbilling from logging excessive hours, doing duplicative work, and unnecessary travel time, to name a few areas.
The trust's author, attorney and accountant John Koresko V, was ordered by a federal judge in March to pay $18.4 million in restitution for his alleged misuse of millions of dollars in funds from several employee-benefit plans. The judgment against Koresko and the Koresko Law Firm was the remainder of their $38.4 million liability to the benefit plans after nearly $20 million of Koresko's assets across 10 bank accounts have been frozen and turned over to an independent fiduciary.
U.S. District Judge Mary A. McLaughlin of the Eastern District of Pennsylvania said in a March ruling that the U.S. Department of Labor presented "voluminous" evidence of Koresko's alleged violations.
That included the diversion of tens of millions of dollars of plan assets through more than 21 accounts created by Koresko at several banks; the transfer of millions of dollars of plan assets into accounts that only Koresko controlled; the taking out of over $35 million in loans on the trusts' insurance policies; and the transfer of that money to accounts that only Koresko controlled.
The DOL also alleged Koresko deposited plan assets into various Interest on Lawyers' Trust Accounts and accounts in Koresko's name. Other allegations included Koresko's transfer of millions of dollars of plan assets to law firms and consulting firms through which the plans did not benefit; the use of death benefit proceeds to purchase property in the Caribbean island of Nevis and in South Carolina; the use of plan assets to pay personal expenses; and the use of plan assets to pay business expenses, according to the opinion. There were never any criminal charges filed against Koresko, his attorney said in March.
As for the work performed on Castellano's case, Hey said that too much time was spent on certain aspects of the case.
"With respect to many filings or functions, many attorneys worked on a project and counsel expended an extraordinary amount of time, which will not be fully compensated," Hey said.
This included over 37 hours to draft an answer to a complaint and counterclaim, which amounted to $10,000, and almost 90 hours devoted to preparation of interrogatories and production of documents from August and September of 2006, which came to $22,000.
"Counsel has not provided any evidence to justify nearly 90 hours for the preparation of this discovery," Hey said. "Even considering the complexity of the intertwining of the Koresko entities with the trusts, such a figure is unreasonable."
Examples of duplicative work, according to Hey, included multiple attorneys attending conferences and hearings when only one would suffice. "The billing entries for counsel's travel also appear excessive at times," Hey added, noting that excessive hours had been billed for a trip to Tampa to attend a deposition of Castellano.
Hey ordered that the $567,000 be paid with funds from the trust, to be restored by Koresko.
"Consistent with Judge McLaughlin's prior orders, I find that the attorneys' fees amassed in this case were directly caused by the Koresko entities' breaches of their fiduciary duty to pay Mrs. Castellano the benefit to which she was entitled," Hey said.