Opinion
Case No. 3:02CV7282
June 16, 2003
ORDER
Plaintiff Constance S. Pelchat brought this action pursuant to the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1132(a)(1)(B), for denial of benefits under a long-term disability policy she held with defendant UNUM Life Insurance Company ("UNUM"). On March 25, 2003, I granted plaintiff's motion for judgment on the administrative record, finding that UNUM's decision to terminate long-term disability benefits was arbitrary and capricious. This matter is now before the court on plaintiff's motions for past due benefits, future participation in the plan, and attorney's fees. For the following reasons, plaintiff's motions shall be granted in part and denied in part.
I. Past Due and Future Benefits
Plaintiff requests $22,046 in past due benefits from UNUM and future participation in its disability insurance policy. UNUM claims that plaintiff's recovery is limited to $10,122.
The parties do not dispute that when UNUM terminated plaintiff's long-term disability benefits in December, 1999, she was receiving $1,446 per month. Plaintiff admits that she began receiving $1,064 a month in social security disability benefits six months later. Under the insurance policy, social security disability benefits are a "deductible source of income." Therefore, starting in June, 2000, any disability benefits plaintiff should have received from UNUM would have been reduced to $382 per month.
Based on these calculations, plaintiff arrives at $22,046 in past due benefits for the period between December, 1999, and April, 2003.
However, as I noted in my order granting plaintiff judgment on the administrative record, plaintiff's policy limits the pay period for disabilities based on "self-reported symptoms" to twelve months. The policy defines "self-reported symptoms" as:
the manifestation of your condition which you tell your doctor, that are not verifiable using tests, procedures or clinical examinations standardly accepted in the practice of medicine. Examples of self-reported symptoms include, but are not limited to headaches, pain, fatigue, stiffness, soreness, ringing in the ears, dizziness, numbness and loss of energy.
R. 00732 (emphasis added).
Plaintiff's doctors informed UNUM that she was unable to perform the material and substantial duties of her job because of migraine headaches, myofascial pain, and muscle spasms that impeded her ability to breathe. Unfortunately for plaintiff, her condition is not "verifiable using tests, procedures or clinical examinations standardly accepted in the practice of medicine." Id. Her disability is therefore based on self-reported symptoms. Hence, her recovery for past due benefits is limited by the terms of her insurance contract, and UNUM had the right to terminate her long-term disability benefits after she had been paid for twelve months.
The administrative record demonstrates that plaintiff has already been paid five months of long-term disability benefits. She is therefore entitled to an additional seven months of benefits. Plaintiff should be paid $1,446 for the time period between December, 1999, and May, 2000. She should receive $382 for June, 2000.
This results in $9,058 for past due benefits. Because plaintiff's policy limited her pay period to twelve months, her motion for future participation in the plan is denied.
II. Attorney's Fees
Section 502 of ERISA provides that "in any action under this subchapter . . . by a participant, beneficiary, or fiduciary, the court in its discretion may allow a reasonable attorney's fee and costs of action to either party." 29 U.S.C. § 1132(g)(1). This language has been interpreted by the Sixth Circuit as granting "substantial discretion" to the district court to grant or deny a request for attorney fees in an ERISA action. Jordan v. Michigan Conf. of Teamsters Welfare Fund, 207 F.3d 854, 860 (6th Cir. 1998).
A. The King Factors
In exercising its discretion to grant attorney's fees under § 1132(g), the Sixth Circuit has said a district court should consider the following five factors:
(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.
Secretary of Dep't of Labor v. King, 775 F.2d 666, 669 (6th Cir. 1985).
The King factors are flexible, "developed so as to give guidance to courts in interpreting the discretion to be exercised under the statute." The Firestone Tire Rubber Co. v. Neusser, 810 F.2d 550, 558 (6th Cir. 1987). "Not all of the factors will be relevant in a given case, and no single factor is necessarily dispositive." Id. Also, the Sixth Circuit recognizes no presumption as to whether attorney fees will be awarded. Foltice v. Guardsman Products, Inc., 98 F.3d 933, 936 (6th Cir. 1996) (citing Armistead v. Vernitron Corp., 944 F.2d 1287, 1301-02 (6th Cir. 1991) (rejecting the proposition that a plan participant who wins an ERISA action should ordinarily recover an attorney's fee unless special circumstances would render such an award unjust)).
1. Defendant's Degree of Culpability or Bad Faith
Under the first factor, UNUM claims its decision to terminate plaintiff's long-term disability benefits was not made in bad faith but based on a good faith interpretation of plaintiff's policy. UNUM also argues that although its decision may have been incorrect, there was enough information in plaintiff's claim file to support its conclusion.
There may not be enough evidence to conclude UNUM acted in bad faith, but UNUM has certainly demonstrated a high degree of culpability in wrongfully denying plaintiff's claim for benefits. UNUM's conduct can be characterized as culpable for two reasons. First, UNUM cited a lack of "objective medical evidence" as a reason for denying plaintiff's claim. As I explained in my previous order, the policy does not require an insured to submit "objective medical evidence" to qualify as "disabled." Therefore, it was wrong for UNUM to impose such a requirement. Second, UNUM based its decision to deny benefits — almost exclusively in advance of litigation — on a functional capacity evaluation that the evaluators labeled "borderline invalid."
Bad faith and culpability are not the same — as the disjunctive "or" in King demonstrates. Culpability is merely defined as "blameworthiness." Black's Law Dictionary 385 (7th ed. 1999). Another circuit has defined it as "implying that the act or conduct spoken of is reprehensible or wrong, but not that it involves malice or a guilty purpose." Werner v. Upjohn Co., Inc., 628 F.2d 848, 856-57 (4th Cir. 1980) (citing Black's Law Dictionary (4th ed. 1968)).
UNUM's decision was therefore not based on a good faith interpretation of its policy language or an honest mistake. Its decision was more than "incorrect." Thus, plaintiff has shown sufficient culpability on behalf of UNUM. This factor favors an award for attorney fees.
A troubling aspect of this case is how easily litigation could have been avoided. As UNUM now argues, plaintiff's alleged disability is "self-reported." Nonetheless, under the terms of her policy, she met the definition of "disabled." Therefore, she should have received her benefits under the contract. Based on the information before it, UNUM should have continued long-term disability benefits for seven more months. Instead, UNUM decided to deny plaintiff's claim based on a lack of "objective medical evidence" and a "borderline invalid" functional capacity evaluation. As explained in the order granting plaintiff judgment on the administrative record, these reasons were arbitrary and capricious, and, therefore, insufficient to deny plaintiff's claim under ERISA. For the purposes of this order, the reasons are also evidence of a high degree of culpability.
2. UNUM's Ability to Satisfy an Award of Attorney's Fees
Plaintiff asserts that UNUM has the financial ability to satisfy an award of attorney's fees. UNUM does not expressly dispute its ability to satisfy such an award. This factor alone, however, is not dispositive. See e.g., Firestone, 810 F.2d at 557-58 ("Although Firestone clearly possesses the ability to pay, this factor alone should not be dispositive when examination of all other relevant factors indicates that fees should not be awarded."); Gribble v. Cigna Healthplan of Tennessee, Inc., 1994 WL 514529, at *4 (6th Cir. Sept. 20, 1994) ("The second factor is weighed more for exclusionary than for inclusionary purposes."). UNUM's ability to pay supports, though it does not mandate, an award of fees for the plaintiff.3. Deterrent Effect
The third factor — the deterrent effect of a fee award on other insurance companies — is one that is likely to be more significant in a case where the defendant is highly culpable. Foltice, 98 F.3d at 937 ("Honest mistakes are bound to happen from time to time, and fee awards are likely to have the greatest deterrent effect where deliberate misconduct is in the offing.").
Because of UNUM's culpable conduct, an award of attorney's fees may deter other insurance companies from making the same mistakes. Plaintiff's case could remind UNUM administrators and the administrators of other insurance companies that their decisions must be based on a complete review of the insured's claim file. Specifically, without this deterrent effect, other insurance companies might be inclined to impose unwarranted requirements for eligibility or rely selectively on test results on dubious or even less reliability. This factor therefore weighs in support of an award of attorney's fees.
4. Common Benefit
The fourth King factor may be viewed as a codification of the common fund doctrine of the common law. Armistead, 944 F.2d at 1304. The district court should consider whether the plaintiff sought to confer a common benefit on all participants of an ERISA plan or resolve significant legal questions regarding ERISA. Id.
Plaintiff argues that by bringing her claim, she has forced UNUM to review and analyze its claim review procedure and that may have some beneficial effect on all plan participants.
Most of the participants in UNUM's plan, however, stand to gain nothing from plaintiff's lawsuit. Plaintiff sought only to recover her own benefits. She was not attempting to confer a common benefit on the plan's participants, and the merits of the case did not turn on the resolution of any difficult ERISA question. This factor therefore militates against an award of attorney's fees.
5. Relative Merits of Parties' Positions
For the reasons reflected in my March, 2003, order, the fifth King factor favors plaintiff. UNUM argues that its position found support within the administrative record and appears "no more devoid of merit than that of any other losing litigant."Br. at 12 (citing Foltice, 98 F.3d at 938).
Unlike some losing litigants, however, UNUM's position was not based on a reasonable interpretation of the insurance contract, an honest mistake construing plaintiff's claim file, or a complex issue of law. Cf. Firestone, 810 F.2d at 557 ("The present case involves an important, complex question of first impression. `The issues involved are of recent origin, certainly are not free of doubt and are quite complex. The action of the [plaintiffs] in precipitating the action was necessary and entirely reasonable.'") (citing United Ass'n of Journeymen and Apprentices of the Plumbing and Pipefitting Ind. v. Myers, 488 F. Supp. 704, 716 (M.D.La. 1980)).
6. Conclusion
In taking into consideration the above factors, attorney's fees for plaintiff are warranted. UNUM has forced plaintiff to extensively argue entitlement to damages. Without the award, plaintiff's legitimate entitlement to benefits would be impaired substantially, if not nearly defeated entirely, if she had to compensate her attorney from her own limited resources.
B. Calculation of the Amount
The Sixth Circuit requires a district court to apply the "lodestar" method in calculating the appropriate fee award. Bldg Serv. Local 47 Cleaning Contractors Pension Plan v. Grandview Raceway, 46 F.3d 1392, 1401 (6th Cir. 1995). The lodestar method requires, at a minimum, multiplying "the number of hours reasonably expended on the litigation . . . by a reasonable hourly rate." Hensley v. Eckerhart, 461 U.S. 424, 433 (1983).
Adjudication of the lodestar fee does not end the fee analysis. While there is a "strong presumption" that the lodestar represents a reasonable fee, pertinent circumstances may warrant an adjustment of the fee either upward or downward. Bldg. Serv. Local 47, 46 F.2d at 1401-02. In Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 717-19 (5th Cir. 1974), the Fifth Circuit enunciated twelve factors that trial courts may consider in calculating reasonable attorney's fee awards. The Supreme Court has determined that "Johnson's `list of 12' . . . provides a useful catalog of the many factors to be considered in assessing the reasonableness of an award of attorney's fees. . . ." Blanchard v. Bergeron, 489 U.S. 87, 91 n. 5 (1989). These twelve factors are:
(1) the time and labor required; (2) the novelty and difficulty of the questions; (3) the skill requisite to perform the legal service properly; (4) the preclusion of other employment by the attorney due to acceptance of the case; (5) the customary fee; (6) whether the fee is fixed or contingent; (7) time limitations imposed by the client or the circumstances; (8) the amount involved and the results obtained; (9) the experience, reputation, and ability of the attorneys; (10) the "undesirability" of the case; (11) the nature and length of the professional relationship with the client; and (12) awards in similar cases.
Pashcal v. Flagstar Bank, 297 F.3d 431, 434-35 (6th Cir. 2002) (citations omitted).
Plaintiff's counsel states that he has expended 41.1 hours assisting plaintiff with her administrative claim and in this litigation. Plaintiff's counsel further estimates that six additional hours were required to reply to defendant's opposition to plaintiff's motions for benefits and attorney's fees. The total number of hours expended on this litigation was, therefore, 47.1 hours. The customary hourly fee for federal court litigation at plaintiff's counsel's firm is $175.00/hour. According to the court's calculation, this results in lodestar fees of $8,242.50.
I find plaintiff's request that attorney's fee be awarded at $23,732.40, based on the contingency fee agreement between plaintiff and her counsel, as unreasonable. Moreover, the calculation does not follow the lodestar method. I also find plaintiff's argument that the lodestar award should be enhanced fifty percent, as in Paschal, 297 F.3d at 436, to be without merit. The lodestar in this case is reasonable. Therefore, an analysis of the Johnson factors is not necessary.
CONCLUSION
It is, therefore,Ordered that
1. UNUM should pay plaintiff $9,058 in past due benefits for the period between December, 1999, and June, 2000. Plaintiff's motion for future participation in the plan be, and hereby is, denied.
2. Plaintiff be, and hereby is, awarded $8,242.50 in attorney's fees.
So ordered.