Opinion
Civil No. 99-1039 (JRT/FLN)
January 8, 2003.
Mark M. Nolan, NOLAN, MacGREGOR THOMPSON, for plaintiff.
Joshua Bachrach, RAWLE HENDERSON LLP, for defendant.
ORDER AWARDING ATTORNEY'S FEES AND PREJUDGMENT INTEREST ON DELAYED BENEFITS
Plaintiff Julie Parke prevailed in an Employee Retirement Income Security Act ("ERISA") action before this Court on November 5, 2001. The Court issued its Findings of Fact, Conclusions of Law, and Order for Judgment on September 25, 2002 ("September 25, 2002 Order"), and awarded plaintiff prejudgment interest on her delayed benefits and attorney's fees. The Court now resolves plaintiff's claims regarding the amount of interest and attorney's fees owed to plaintiff.
BACKGROUND
Plaintiff worked as an account executive at Petry Media Corp./Blair Television, but resigned on June 1, 1998, due to severe complications from diabetes, from which she has suffered since childhood. Shortly thereafter, on August 18, 1998, she applied for long-term disability benefits from First Reliance Standard Life Insurance Company, the defendant in this action. Initially, defendant denied her claim. Plaintiff appealed and defendant informed her, in a letter dated June 4, 1999, that it was reversing its denial, and awarding benefits through January 30, 1999. However, in that same correspondence, defendant suspended benefits after January 30, 1999 to investigate plaintiff's disability. Eventually, defendant determined that plaintiff was entitled to continue receiving benefits, and reinstated her benefits.
Although defendant voluntarily reinstated plaintiff's benefits, the following issues were tried to the Court: 1) whether defendant breached its duties under ERISA in denying and then suspending plaintiff's benefits; 2) whether defendant made proper offsets of plaintiff's social security benefits; and 3) whether plaintiff was entitled to attorney's fees and costs. After hearing the evidence, the Court determined that defendant had breached its fiduciary duties, which entitled plaintiff to interest for the separate delays. She is entitled to interest for the period of time between defendant's initial denial of her benefits and the date defendant first began paying benefits after reversing the denial. She is also entitled to interest for the period during which her benefits were suspended. The Court additionally determined that defendant was properly offsetting payments received by social security. And finally, the Court found that plaintiff is entitled to attorney's fees and costs.
ANALYSIS
I. PREJUDGMENT INTEREST ON DELAYED BENEFITS
Pre- and post-judgment interest are calculated according to 28 U.S.C. § 1961. See Mansker v. TMG Life Ins. Co., 54 F.3d 1322 (8th Cir. 1995). The parties agree that the applicable interest rate is 5.271%. They also essentially agree on the total time period for which prejudgment interest is due. Plaintiff calculates interest from September 18, 1998 through October 14, 2002. Defendant calculates interest from August 30, 1998 through October 1, 2002, a difference from the plaintiff's calculation by a mere six days. Obviously, the difference in the interest calculation is negligible, and the Court will adopt the defendant's dates.
The Court, in the September 25 Order, noted that the record was not clear regarding the actual time spans of the two periods of delayed benefits in question and requested briefing on that issue. Neither party explained how it arrived at the dates provided. However, since the difference is negligible, the Court finds that it can resolve the issue without further briefing. In addition, plaintiff provided a reply brief in response to defendant's computation of interest, and in that reply brief, plaintiff did not object to defendant's dates.
The parties disagree, however, as to the benefit amount on which interest should be calculated. Plaintiff argues that interest should be calculated on a monthly disability amount of $3,367.91, which is her gross benefit amount without an offset for Social Security Disability Benefits ("SSDI"). Defendant argues that interest should be calculated on the net benefit, after an offset for SSDI. In the September 25, 2002 Order, the Court determined that the terms of the policy entitled defendant to this offset. See September 25, 2002 Order at 21-23. Plaintiff argues, however, that she did not receive the SSDI payment until October 23, 1999 and that she therefore is entitled to interest on the full amount. The Court carefully reviewed the record, and finds that the delay on the SSDI payments was not attributable to any action or inaction on the part of defendant. Therefore, the Court is not persuaded that plaintiff should be awarded prejudgment interest on the full amount of the benefits. Instead, the Court calculates the interest using the net benefit amount, and awards $687.68.
The Court calculates this amount as follows, using the statutory interest rate, computed daily and compounded annually:
The Court calculates the interest on delayed benefits for each pay period as follows:
For first two payments
Net benefit amount x 5.271% (interest rate) = per annum amount Per annum amount / 365 (days per year) = per day interest due Per day interest due x number of days payment was delayed = interest due
The Court calculates interest on interest as follows:
Interest on delayed benefit x 5.271% (interest rate) = per annum amount Per annum amount / 365 (days per year) = per day interest due Per day interest due x number of days interest payment was delayed = interest on interest
II. ATTORNEY'S FEES AND COSTS
1. Prelitigation Fees and Costs
A. Defendant's Objections
Defendant has renewed its argument that plaintiff is not entitled to recover fees and costs associated with the administrative appeal, citing as support for its position Peterson v. Continental Casualty Co., 282 F.3d 112, 119-20 (2nd Cir. 2002). The Court has reviewed that case and finds that it does not change the Court's determination.
2. Post-offer of judgment fees
On March 31, 2000, defendant made an offer, pursuant to Federal Rule of Civil Procedure 68, that judgment be entered against it in the amount of $25,000 together with costs accrued to date. Plaintiff rejected the offer, and defendant argues that plaintiff consequently is not entitled to fees that accrued after March 31, 2000.
The making of a Rule 68 offer, however, does not automatically cut off plaintiff's right to seek a fee award for post-offer legal work. If an offer of judgment does not include an offer to pay attorney's fees, and the underlying fee-shifting statute does not define attorney's fees as a part of costs, post-offer fee awards are not precluded. See, e.g., Sheppard v. Riverview Nursing Center, Inc., 88 F.3d 1332, 1337 (4th Cir. 1996) (reasoning that a rejection of Rule 68 offer in Title VII case did not preclude award of post-offer fees); Haworth v. State of Nevada, 56 F.3d 1048 (9th Cir. 1995) (holding that a Rule 68 offer does not cut off entitlement to seek post-offer fee award because the Fair Labor Standards Act defines attorney's fees separately from costs); see also Marek v. Chesny, 473 U.S. 1, 50 (1985) (Brennan, J. dissenting) (ERISA fee-shifting statute defines attorney's fees separately from costs).
ERISA's fee-shifting provision provides that "[i]n any action under this subchapter . . . the court in its discretion may allow a reasonable attorney's fee and costs." 29 U.S.C. § 1132(g)(1); compare Marek, 473 U.S. at 11-12 (post-offer fees not recoverable under 42 U.S.C. § 1983 where offer of judgment explicitly included attorney's fees and the statutory language includes attorney's fees as part of the costs). Defendant's offer of judgment did not include an offer for attorney's fees, and defendant points to no extrinsic evidence to indicate that it was defendant's intent to include attorney's fees. Therefore, the Rule 68 offer does not foreclose an award of post-offer attorney fees.
The Court noted in the September 25 Order that plan beneficiaries who succeed in ERISA actions should recover attorney fees unless special circumstances would render the award unjust. The Eighth Circuit recently overruled the case on which that proposition is based. See Martin v. Arkansas Blue Cross and Blue Shield, 299 F.3d 966, 971-72 (8th Cir. 2002) (expressly overruling Landro v. Glendenning Motorways, Inc., 625 F.2d 1344 (8th Cir. 1980)). The Martin decision, however, does not affect this Court's analysis of the five Westerhaus factors. See Lawrence v. Westerhaus, 749 F.2d 494, 495-96 (8th Cir. 1984). The Court discussed the Westerhaus factors in the September 25 Order, and incorporates that discussion by reference. Even absent the presumption in favor of awarding a prevailing plaintiff attorney's fees, the Court finds that plaintiff in this case is entitled to such an award.
Although Rule 68 does not require that plaintiff bear her own post-offer attorney's fees, the Court is not prohibited from considering plaintiff's rejection of the settlement offer as one factor affecting its decision whether to award fees or in what amount. See Moriarty v. SVEC, 233 F.3d 955, 967 (7th Cir. 2000) (substantial settlement offers should be considered as a factor in determining an award of reasonable attorney's fees even where Rule 68 does not apply); Sheppard, 88 F.3d at 1337.
3. Proportion of fees to recovery
Defendant also argues that the fee request is unreasonable, given the ultimate amount recovered by plaintiff. The Court disagrees. Although plaintiff recovered only a small sum, she achieved significant success on her claim, and at the same time, answered an important question for ERISA beneficiaries. See, e.g., Hyde v. Small, 123 F.3d 583, 585 (7th Cir. 1997) (a plaintiff who "aims small, and obtains an amount that is significant in relation to that aim . . . is prima facie entitled to an award of fees even if the case establishes no precedent"); Dala v. Alliant Techsystems, Inc., 182 F.3d 757, 761 (10th Cir. 1999) (reasoning that "even in cases where the damage award is truly nominal, a prevailing party may still recover reasonable attorney fees."). Although this litigation spanned several years, plaintiff achieved resolution of her claims in an expedient fashion. Plaintiff did not protract the litigation to "run-up" fees, and the Court finds that the relatively small recovery does not bar an award of attorney's fees.
B. Calculation of Fee Award
Plaintiff seeks $101,077.20 in attorney's fees, based on her attorney's hourly charges. As the Supreme Court has repeatedly recognized, "[t]he most useful starting point for determining the amount of a reasonable fee is the number of hours reasonably expended on the litigation multiplied by a reasonable hourly rate." Hensley v. Eckerhart, 461 U.S. 424, 433 (1983); see also Emmengger v. Bull Moose Tube Co., 33 F. Supp.2d 1127, 1133 (E.D.Mo. 1998) (internal citations omitted) (attorney's fee should be consistent with market rates and practices in the community). That product, known as the "lodestar" figure, is presumed to represent the reasonable fee. See City of Burlington v. Dague, 505 U.S. 557, 562 (1992). However, the "product of reasonable hours times a reasonable rate does not end the inquiry." City of Riverside v. Santos, Rivera, 477 U.S. 561, 568 (1986). A court must consider other factors, including the results obtained in light of the plaintiff's litigation objectives. Id.
After consideration of the relevant factors, the Court finds that the rates charged by plaintiff's attorneys and the hours expended are reasonable. First, the rates charged are consistent with the market rate. Two attorneys worked extensively on this case: Mark M. Nolan, at a rate of $180 to $205 per hour and Jodell M. Galman, at $150 to $175 per hour. Although plaintiff's attorneys did not submit an affidavit supporting the reasonableness of these rates, the Court is familiar with the rates charged by ERISA attorneys in the Minneapolis-St. Paul metropolitan area, and finds that these rates are reasonable. In addition, the Court finds reasonable the number of hours expended. Given the unsettled law and the vigorous defense in this case, the Court finds 552.09 hours adequately reflects the amount of time reasonably necessary to resolve this matter.
Although the Court finds that, in general, the requested fees are justified, the following adjustments are made to plaintiff's request. First, the Court will subtract $1,274.50 for fees associated with plaintiff's failed argument that defendant improperly set-off amounts plaintiff received as Social Security benefits. Next, the Court will deduct $1,340 which represents fees associated with the failed class action certification. There are also several entries for which part of the time appears to have been dedicated to the unsuccessful class certification. Because the class certification issue was briefed and argued along with the summary judgment motion, the Court will deduct a percentage of those entries amounting to $1,235.19.
Finally, the Court will reduce the award for entries that the Court finds could have been accomplished more quickly, or at a lower rate. First, $175 per hour was charged to file a complaint in federal court, a task that was completed in .4 hour. The Court finds that this could have been accomplished at a lower rate, and will reduce the award by half. Similarly, $170 per hour was charged to copy cases for two hours, the Court will reduce this amount from $340 to $70. In a later entry, a rate of $160 per hour was charged to "retrieve Robyn case." It is unclear what this entry signifies, but the Court finds that a law clerk or assistant could have retrieved the case, and will reduce the fee by $60. Next, two entries are dedicated to assembling working copies of exhibits. A clerk or assistant could have performed this task, and the Court accordingly will reduce the award by $260. Finally, $205 per hour was charged to "add to and find missing exhibits." Again, this task could have been assigned to a clerk, and the Court will reduce the fee by $153.75.
Plaintiff succeeded in resolving a significant legal question under ERISA — whether a plaintiff can recover interest on delayed benefits as equitable restitution. That answer will assist benefit plans, and individuals who participate in those plans, in future dealings. This award of attorney fees is appropriate.
C. Costs
Plaintiff requests $2,074.48 in costs. The Court must reduce this request by $186.09 — the amount attributable to computer assisted legal research (CALR). See Ryther v. KARE 11, 864 F. Supp. 1525, 1534 (D.Minn. 1994) ("It is well-settled that computer-aided research, `like any other form of legal research, is a component of attorney's fees and cannot be independently taxed as an item of cost.'") (quoting Leftwich v. Harris Stowe State College, 702 F.2d 686, 695 (8th Cir. 1983)).
The Court also disallows costs requested for messenger service and Federal Express. It is well established that such expenses are not taxable under § 1920. Hollenbeck v. Falstaff Brewing Corp., 605 F. Supp. 421, 439 (D.Mo. 1984), aff'd, 780 F.2d 20 (8th Cir. 1985) (holding that office expenses are not "costs" as that term is used in § 1920, but rather are non-taxable "out-of-pocket expenses"). These are not litigation costs, but are items "normally associated with the practice of law and are commonly referred to as `overhead' costs." Cody v. Private Agencies Collaborating Together, Inc., 911 F. Supp. 1, 6 (D.D.C. 1995) (holding that postage, messenger, Federal Express, telephone, parking, and travel are all overhead costs). See also El-Fadl v. Central Bank of Jordan, 163 F.R.D. 389, 390 (D.D.C. 1995) (citing cases and noting that the "overwhelming weight of authority" have declined to tax costs for courier, mail, and telephone services).
The Court does, however, allow the requested costs for the depositions of Rosetta Davis, Peter Sailor, and Richard Walsh. Defendant objects to the award of these costs because the depositions were outside the administrative record. The Court, however, ruled that it could consider information outside the administrative record; therefore, the Court finds that the challenged depositions were reasonably necessary in preparing the case and will be allowed. See Manildra Milling Corp. v. Ogilvie Mills, Inc., 76 F.3d 1178, 1184 (Fed. Cir. 1996).
Plaintiff next seeks taxation of $658.49 for printing expenses. The costs of printing pleadings and other papers required to be served upon opposing parties and the Court are taxable under § 1920(3). McMillan v. United States, 891 F. Supp. 408, 415 (W.D.Mich. 1995). Plaintiff properly specified the pleadings and papers for which costs are sought; therefore, the Court will award the requested amount for printing. Finally, plaintiff requests $171 for a transcript of the trial. This amount is properly awarded under § 1920(2).
ORDER
Based on the foregoing, and all of the records, files, and proceedings herein, it is HEREBY ORDERED that:
1. Attorney's fees are GRANTED to plaintiff in the amount of $96,448.77
2. Costs and expenses are GRANTED to plaintiff in the amount of $1,680.94;
3. Prejudgment interest is GRANTED to plaintiff in the amount of $687.68;
4. Defendant is hereby ORDERED to remit to plaintiff a total amount of $98,817.39 for costs, expenses, attorney's fees and interest.
LET JUDGMENT BE ENTERED ACCORDINGLY.
Payment Date Date Days Net Interest Payment Interest dates Due Paid delayed Benefit on Made on delayed Interest benefit 8/30/98 to 9/30/98 9/30/98 6/2/99 245 3,367.91 119.07 21.39 9/30/98 to 10/30/98 10/30/98 6/2/99 214 3,367.91 104.00 18.99 10/30/98 to 11/30/98 11/30/98 6/2/99 184 1,876.91 49.68 9.0 11/30/98 to 12/31/98 12/31/98 6/2/99 154 1,876.91 41.58 7.52 12/31/98 to 1/31/99 1/31/99 6/2/99 123 1,876.91 33.21 5.91 1/31/99 to 2/28/99 2/28/99 6/2/99 92 1,876.91 24.84 4.51 2/28/99 to 3/31/99 3/31/99 6/2/99 63 1,876.91 17.01 16,839.55 3.36 3/31/99 to 4/30/99 4/30/99 10/14/99 197 1,876.91 53.19 8.82 4/30/99 to 5/31/99 5/31/99 10/14/99 167 1,876.91 45.09 7.26 5/31/99 to 6/30/99 6/30/99 10/14/99 136 1,876.91 36.72 5.96 6/30/99 to 7/31/99 7/31/99 10/14/99 106 1,876.91 28.62 4.63 7/31/99 to 8/31/99 8/31/99 10/14/99 75 1,876.91 20.25 3.26 8/31/99 to 9/30/99 9/30/99 10/14/99 44 1,876.91 11.88 1.93 9/30/99 to 10/31/99 10/31/99 10/14/99 0 1,876.91 0 10/31/99 to 11/30/99 11/30/99 10/14/99 0 1,876.91 0 26,943.28 TOTALS 585.14 43,782.83 102.54The Court noted in the September 25 Order that plan beneficiaries who succeed in ERISA actions should recover attorney fees unless special circumstances would render the award unjust. The Eighth Circuit recently overruled the case on which that proposition is based. See Martin v. Arkansas Blue Cross and Blue Shield, 299 F.3d 966, 971-72 (8th Cir. 2002) (expressly overruling Landro v. Glendenning Motorways, Inc., 625 F.2d 1344 (8th Cir. 1980)). The Martin decision, however, does not affect this Court's analysis of the five Westerhaus factors. See Lawrence v. Westerhaus, 749 F.2d 494, 495-96 (8th Cir. 1984). The Court discussed the Westerhaus factors in the September 25 Order, and incorporates that discussion by reference. Even absent the presumption in favor of awarding a prevailing plaintiff attorney's fees, the Court finds that plaintiff in this case is entitled to such an award.