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ERISA Watch – Achieving a Remand to the Disability Plan Administrator Warrants Attorneys’ Fees under ERISA Section 502(g)

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Show me the money!  Halloween is around the corner and this week’s notable decisions are scary, at least to ERISA plan administrators.

This past week saw FOUR attorneys’ fee decisions granting fees to the successful disability claimants.  The fee awards ranged from $28,340 to $121,267.  But, in Corey v. Sedgwick Claims Mgmt. Servs., et al., No. 1:15 CV 1736, 2017 WL 4844008 (N.D. Ohio Oct. 26, 2017), the amount of the fees are yet to be determined.  The great thing about Corey is that the court awarded attorneys’ fees absent a final decision on the underlying merits of the long-term disability claim.  The majority of courts deciding this issue (and definitely within the Sixth Circuit) also hold that achieving a remand to the plan administrator is sufficient success on the merits entitling a claimant to attorneys’ fees.  In Corey, the district court originally granted judgment in favor of Defendants.  Corey took the dispute up to the Sixth Circuit, which reversed the district court’s grant of judgment in favor of Defendants and held that Defendants’ denial was arbitrary and capricious because it did not adequately explain why Corey’s medications and treatment plans failed to satisfy the plan’s requirement for objective findings of a disability.  Rather than award the benefits to Corey, the Sixth Circuit ordered that the case be remanded to the administrator for a “full and fair review” (the one that Corey should have gotten in the first place).  On Corey’s motion for attorneys’ fees, the district court considered the following five factors to determine if a fee award is warranted:

“(1) the degree of the opposing party’s culpability or bad faith; (2) the opposing party’s ability to satisfy an award of attorney’s fees; (3) the deterrent effect of an award on other persons under similar circumstances; (4) whether the party requesting fees sought to confer a common benefit on all participants and beneficiaries of an ERISA plan or resolve significant legal questions regarding ERISA; and (5) the relative merits of the parties’ positions.”

The district court determined that all but the fourth factor favored an award of fees and granted Corey’s motion.

If you’re interested in fee awards in ERISA disability cases, check out my partner’s article, “A Survey of Fee Awards in ERISA Disability Benefit Claim Cases from the Past Five Years” in the ABA Employee Benefits Committee Newsletter published this past summer.

Lastly, if you want something entertaining to listen to on your commute home, check out Saturday’s edition of The Law Is My Ass featuring an interview of mediator extraordinaire Cathy Yanni about mediation.  (Cathy regularly mediates ERISA cases).  Enjoy!

Below is Kantor & Kantor LLP’s summary of this past week’s notable ERISA decisions.

Attorneys’ Fees

Sixth Circuit

Corey v. Sedgwick Claims Mgmt. Servs., et al., No. 1:15 CV 1736, 2017 WL 4844008 (N.D. Ohio Oct. 26, 2017) (Judge Patricia A. Gaughan).  In this case, the Sixth Circuit reversed the district court’s grant of judgment in favor of Defendants and held that Defendants’ denial was arbitrary and capricious. The Sixth Circuit ordered that the case be remanded to the administrator for a “full and fair review” consistent with its opinion.  On Plaintiff’s motion for attorneys’ fees, the district court determined that all but the fourth factor (whether the party requesting fees sought to confer a common benefit on all participants and beneficiaries of an ERISA plan or resolve significant legal questions regarding ERISA) favored an award of fees and granted Plaintiff’s motion.

Pfenning v. Liberty Life Assurance Co. of Boston, No. 3:14-CV-471, 2017 WL 4769009 (S.D. Ohio Oct. 19, 2017) (Judge Thomas M. Rose).  In this matter where Liberty Life initially won a long term disability dispute under abuse of discretion review, it was appealed to the Sixth Circuit Court of Appeals, where Liberty Life then stipulated that the standard of review should have been de novo, the case was remanded to the district court and then Plaintiff later won under de novo review, the court granted Plaintiff’s motion for attorneys’ fees and costs in the amount of $121,267.00 and prejudgment interest at a rate of 3% for 2014; 3% for 2015; 3% for 2016; and 4% for 2017 (utilizing Ohio’s prejudgment method as stated in ORC 1343.03).

Ninth Circuit

Paulson v. Principal Life Ins. Co., No. 16-5268 RJB, 2017 WL 4843837 (W.D. Wash. Oct. 26, 2017) (Judge Robert J. Bryan).  In this dispute over long-term disability benefits, and following the court’s grant of summary judgment to Plaintiff, the court granted Plaintiff’s motion for attorneys’ fees.  The court concluded that the Kerr factors and Rules of Professional Conduct (“RPC”) 1.5 do not counsel for enhancement or reduction to the lodestar amount and Plaintiff should be awarded attorneys’ fees of $83,184.00, the lodestar amount.

Sand-Smith v. Liberty Life Assurance Company of Boston, No. CV 17-0004-BLG-SPW, 2017 WL 4780611 (D. Mont. Oct. 23, 2017) (Judge Susan P. Watters).  In this case where the court previously granted summary judgment to Plaintiff and determined that Montana’s mental health parity law requires the long-term disability policy to provide the same benefits for mental illness that it would have had her disability been physical, the court granted Plaintiff $28,340.00 in attorney fees and $293.47 in costs.  Liberty Life did not oppose the motion.

Breach of Fiduciary Duty

Second Circuit

Sacerdote, et al. v. New York University, No. 16-CV-6284 (KBF), 2017 WL 4736740 (S.D.N.Y. Oct. 19, 2017) (Judge Katherine B. Forrest).  The court denied Plaintiffs’ motion for reconsideration of its dismissal of Plaintiffs’ prudence and failure to monitor claims.  The court did not manifestly err when it determined that, as a matter of law, the inclusion of retail class shares in a plan despite the alleged availability of identical institutional class shares does not, on its own, support a cognizable prudence claim.  The court also rejected Plaintiffs’ claim that new evidence supports Defendant’s failure to monitor; the evidence is not new and was available well in advance of the briefing on defendant’s motion to dismiss.

Disability Benefit Claims

Third Circuit

Patterson v. Aetna Life Insurance Company, No. CV 15-8156, 2017 WL 4786562 (D.N.J. Oct. 23, 2017) (Judge Madeline Cox Arleo).  The court determined that Aetna’s termination of Plaintiff’s claim for long term disability benefits (one that it had paid for seven years, and five years following the favorable opinion of its own IME) was arbitrary and capricious because it failed to properly address whether Plaintiff could perform the material duties of his own occupation.  The DOT and O*Net listings do not contain an exhaustive list of Plaintiff’s material duties and Aetna failed to consider Plaintiff’s actual duties with the Policyholder.  The court also determined that Aetna’s findings as to disability were not supported by the evidence.  “A retroactive finding that a plaintiff was never entitled to LTD benefits, without new medical information, is itself evidence of arbitrariness and capriciousness.”

Discovery

Sixth Circuit

Mac v. Blue Cross Blue Shield Of Michigan & Durr Systems, Inc., No. 16-CV-13532, 2017 WL 4784448 (E.D. Mich. Oct. 24, 2017) (Judge Paul D. Borman).  The court granted Plaintiff’s motion to allow discovery specific to Plaintiff’s breach of fiduciary duty claim plead in the alternative to his benefit claim.  “Specifically, the Plaintiff has requested, and the Court will permit, discovery related ‘to issues of the formulation of the coverage conditions, the medical and scientific support for these conditions, the consistency with which they are applied, and Defendants’ bias in denying these benefits.’”

Ninth Circuit

In Re: Premera Blue Cross Customer Data Security Breach Litigation, No. 3:15-MD-2633-SI, __F.Supp.3d__, 2017 WL 4857596 (D. Or. Oct. 27, 2017) (Judge Michael H. Simon).  The court declined to reach the issue of the scope of Premera’s fiduciary obligations under ERISA or whether the so-called fiduciary exception applies in Washington, because even if it does apply in this case, the types of documents that the court has allowed Premera to maintain as privileged are all documents that are defensive on the trustees’ part and aimed at advising the trustees how far they were in peril.  These documents would not be subject to the fiduciary exception.

ERISA Preemption

Ninth Circuit

Hu v. The Guardian Life Insurance Company of America, No. 17-CV-04098-LHK, 2017 WL 4791145 (N.D. Cal. Oct. 24, 2017) (Judge Lucy H. Koh).  Plaintiff’s claim that Defendant violated Cal. Ins. Code § 10277(b) by failing to give Plaintiff advance notice that under Plaintiff’s group health insurance policy issued by Defendant, coverage of Plaintiff’s dependent son would be terminated on May 30, 2016, and seeking $1525.00—the “doctor’s bill” for two claims—in damages, is not completely preempted by ERISA because Plaintiff’s claim does not rely on and is independent of any duty under an ERISA plan.  The case is remanded to Santa Clara County Superior Court for lack of subject matter jurisdiction.

Exhaustion of Administrative Remedies

Tenth Circuit

Hendrickson v. Prudential Ins. Co. of Am., No. 2:15-CV-565-CW, 2017 WL 4737255 (D. Utah Oct. 19, 2017) (Judge Clark Waddoups).  Prudential’s motion for summary judgment is granted because Plaintiff failed to submit an administrative appeal for his short term disability benefit denial.  The court explained that the Tenth Circuit Court of Appeals has not distinguished between permissive and mandatory language in determining whether ERISA exhaustion is required.  Thus, exhaustion is required when a plan sets out an administrative review process, even if it provides that a claimant “may appeal” a denied claim.  Further, Plaintiff’s long-term disability claim is precluded because qualification for LTD benefits is contingent in part upon receipt of short-term disability benefits.

Life Insurance & AD&D Benefit Claims

Sixth Circuit

Carlson v. Reliance Standard Life Insurance Company, No. 3:15-CV-0200, 2017 WL 4767660 (M.D. Tenn. Oct. 20, 2017) (Magistrate Judge Lanny King).  Reliance Standard did not conduct a full and fair review of Plaintiff’s claim regarding the death of Decedent without considering the supplemental information submitted by Plaintiff.  Specifically, Reliance Standard failed to follow procedural requirements as set forth in 29 C.F.R. § 2560.503-1(i) and arbitrarily applied deadline and tolling rules, it arbitrarily decided which information to review, and it could not have provided a reasoned explanation for its denial that did not address the supplemental information. The court remanded the claim to the administrator to consider the supplemental evidence.  The court declined to decide whether Reliance Standard has a duty to investigate or whether the presumption against suicide applies in this case.

Medical Benefit Claims

Sixth Circuit

Springer v. Cleveland Clinic Employee Health Plan Total Care, No. 1:15CV00020, 2017 WL 4837478 (N.D. Ohio Oct. 26, 2017) (Judge Christopher A. Boyko).  The court determined that  Plaintiff has failed to establish constitutional standing because he has not and cannot show a concrete injury:  He received air ambulance service, Defendant Plan paid what they determined was covered under the Plan, Angel Jet accepted that payment and has not sought reimbursement from Plaintiff.  The court also determined that the Plan’s denial of benefits to Angel Jet and Plaintiff was not arbitrary or capricious as the Plan required precertification which was not sought nor obtained for a non-emergency transport.

Ninth Circuit

Peter B. v. Premera Blue Cross, No. C16-1904-JCC, 2017 WL 4843550 (W.D. Wash. Oct. 26, 2017) (Judge John C. Coughenour).  The court granted summary judgment in favor of Defendants on Plaintiff’s claim asserting that Defendants breached the terms of the Plan and violated ERISA when they failed to pay for continued sub-acute psychological residential treatment for Plaintiff’s dependent son, M.B., and failed to provide a full and fair review of their denial decision.  The court determined that Premera did not offer “shifting rationales” for denial where the initial benefit determination was based on what the Plan requires for medically-necessary short-term residential stabilization treatment—a duration less than 150 days, and the final benefit determination was based on what the Plan requires for medically-necessary indefinite residential treatment—clinical progress within a thirty day period.  The court concluded that “Premera’s coverage determinations were consistent with Plan requirements, Premera relied on the advice of an independent physician in making its final coverage decision, there is no evidence of shifting rationales, and the IRO review validated Premera’s final benefit determination. On this basis, the Court sees no indication that Premera’s potential conflict of interest resulted in an abuse of discretion.”

Pleading Issues & Procedure

Sixth Circuit

Shy, et al. v. Navistar Int’l Corp., et al., No. 3:92-CV-333, 2017 WL 4785583 (S.D. Ohio Oct. 20, 2017) (Judge Walter H. Rice).  The court ordered that if William O. Jones, Jr., a non-UAW retiree who was an attorney (no longer has an active license) and appears to be collaborating with Hall on his present motion, wishes to write or contribute to any future motions filed by Hall, then pursuant to Local Rule 83, he must: (1) reactivate his license to practice law, if necessary; (2) associate with counsel admitted to practice before this Court.

Severance Benefit Claims

Eleventh Circuit

Stephens v. Time Customer Service, Inc., No. 8:17-CV-1338-T-33AEP, 2017 WL 4792180 (M.D. Fla. Oct. 24, 2017) (Judge Virginia M. Hernandez Covington).  In this severance benefit dispute, the court granted Plaintiff’s motion to dismiss the counterclaim in part.  The termination letter and release “relate to” the Time Customer Service, Inc. Severance Plan because Plaintiff’s receipt of the benefits under the Plan, as outlined in the termination letter, were contingent upon her signing that letter and release.  Because the breach of contract claim and claim for specific performance relates to an ERISA-governed plan, they are dismissed as defensively preempted.  The court dismissed the claims for declaratory relief and restitution under ERISA Section 502(a)(3) with leave to amend.

State Bans on Discretionary Clauses

Fifth Circuit

Jacob v. Unum Life Insurance Company of America, No. CV 16-17666, 2017 WL 4764357 (E.D. La. Oct. 20, 2017) (Judge Jane Triche Milazzo).  The court determined that “the plain language of § 3.1201 makes the prohibition on discretionary clauses contained in § 3.1203 applicable to the Plan here. The Plan is a form that was issued or delivered prior to the effective date of the section’s subchapter and does not contain a renewal date. Therefore the prohibition on discretionary clauses applies on the ‘effective date of . . . any change, modification, or amendment of the form occurring on or after June 1, 2011.’ Amendment Number 13 is at the very least an amendment to the Plan that occurred after June 1, 2011 and so triggered the application of § 3.1203 to the Plan.”  The court will review Unum’s interpretation of the Plan de novo.

Statutory Penalties

Sixth Circuit

Springer v. Cleveland Clinic Employee Health Plan Total Care, No. 1:15CV00020, 2017 WL 4837478 (N.D. Ohio Oct. 26, 2017) (Judge Christopher A. Boyko).  The court determined that the applicable statute of limitations for an action for statutory penalties under 29 USC § 1132(c)(1)(B) is one year and Plaintiff’s action is well outside the applicable limitation period. Because the limitation period forecloses this claim, the court denied Plaintiff’s request to amend his Complaint to name the Cleveland Clinic (the Plan Administrator).

Venue

Tenth Circuit

Stephens v. Alliant Techsystems Corp., No. 17-4002, __F.App’x__, 2017 WL 4772419 (10th Cir. Oct. 23, 2017) (Before HARTZ, McKAY, and MATHESON, Circuit Judges).  The district court did not abuse its discretion by overruling the pro se Plaintiff’s objection to the Magistrate Judge’s ruling declining to transfer this case to the District of Minnesota on grounds this would be more convenient for witnesses and serve the interest of justice.  Here, Plaintiff “lives in Utah, he filed this case in the District of Utah, the case involves actions that occurred in Utah, and the court may be required to apply the QDRO, which was issued under Utah law.”  The court dismissed Plaintiff’s allegations of a conspiracy denying him a fair proceeding in Utah.

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