Opinion
Civil Action No. 3:98-CV-2835-D
February 14, 2000
MEMORANDUM OPINION AND ORDER
Pursuant to an agreed judgment entered after the court granted a partial summary judgment, plaintiff UNUM Life Insurance Company of America ("UNUM") recovered $35,928.68 in disability benefit overpayments made to defendant Melissa L. Brandon ("Brandon") under an ERISA employee welfare benefit plan. UNUM now moves for an award of attorney's fees of $9,965.00. Brandon has not responded to the motion within the time permitted by the local civil rules, and the court grants the motion for the reasons that follow.
Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001-1461.
The court sets out in this memorandum opinion and order its findings of fact and conclusions of law. See Fed.R.Civ.P. 52 (a).
I
The court has set out the relevant background facts and procedural history in its summary judgment ruling. UNUM Life Ins. Co. of Am. v. Brandon, 1999 WL 956874, at *1-*2 (N.D. Tex. Oct. 18, 1999). The court adopts that decision in full in addressing the attorney's fees motion and presumes the parties' familiarity with that ruling. The court now recounts the facts to the extent necessary to understand today's decision.UNUM, an issuer of a group long term disability policy, sued Brandon on claims for breach of the policy and unjust enrichment to recover overpayments made to Brandon under an ERISA plan. UNUM moved for summary judgment on all claims, including attorney's fees. The court granted summary judgment in UNUM's favor on the overpayments but denied without prejudice its request for attorney's fees. Id. at *3. The court held that "[i]n view of the open question concerning the amount of Brandon's liability, and of the state of the record, the court cannot adequately consider [the pertinent] factors in all relevant respects." Id.
UNUM sued Brandon on the ground that she had received overpayments under an ERISA employee welfare benefit plan. Id. at *1. When Brandon became disabled, she elected to receive monthly benefits with no reduction for estimated social security benefits. The policy specified that the social security benefits for which Brandon was eligible, and for which her child was eligible due to Brandon's disability, were to be deducted from the policy benefits. Brandon opted to receive policy benefits with no reduction for estimated social security benefits. As a result, she became contractually obligated to repay any resulting overpayment. Id. at *1-*2.
UNUM began making monthly disability payments to Brandon without reducing the amount based on estimated social security benefits. Brandon later advised UNUM that the Social Security Administration ("SSA") had denied her claim for benefits and that she was appealing its decision. SSA eventually decided, however, that Brandon was eligible for benefits effective February 1995. Brandon obtained from SSA a lump sum net benefit payment of $22,795.20 and prospective monthly benefits of $1,128.00. SSA also paid her (due to her own disability) social security benefits for her son. Brandon failed to give UNUM information about these benefits and did not repay any of these sums. As a result, UNUM applied Brandon's minimum monthly benefit of $174.02 to the overpayment each month since April 1998. Id.
The court held that UNUM was entitled to recover from Brandon pursuant to 29 U.S.C. § 1132 (a)(3) because she and her son received social security benefits that resulted in UNUM's making disability policy overpayments. UNUM, 1999 WL 956874, at *2. The policy unambiguously provided that UNUM was entitled to reduce benefit payments to Brandon by the amount of any other income benefits that she received. It clearly defined such benefits to include any social security disability benefits paid to Brandon or to her son based on her eligibility. Id. Brandon unambiguously agreed to repay any overpayment. Under the plain and unambiguous language of the policy and agreement, UNUM was entitled to reimbursement for overpayments that resulted from social security benefits paid to Brandon and her son. Id.
The court rejected Brandon's argument that UNUM was precluded from collecting the overpayments because she had not been "made whole" by receipt of her disability benefits. Id. at *2-*3. It also declined to accept her contention that her son's benefits could not be included in UNUM's claim. Id. at *3
Following the court's summary judgment ruling, the parties entered into an agreed judgment in UNUM's favor, awarding it a recovery of $35,928.68 from Brandon.
II
In an ERISA action, the court in its discretion may allow reasonable attorney's fees to either party. See 29 U.S.C. § 1132 (g)(1); Bellaire General Hosp. v. Blue Cross Blue Shield of Mich., 97 F.3d 822, 832 (5th Cir. 1996). In exercising this discretion, the court must perform a two-part analysis. First, the court determines whether the party is entitled to an award of attorney's fees in light of the relevant factors. Second, if the party is so entitled, the court calculates the proper amount of the fee award. Todd v. AIG Life Ins. Co., 47 F.3d 1448, 1459 (5th Cir. 1995).
The court determines whether a party is entitled to attorney's fees by weighing five factors: (1) the degree of the opposing party's culpability or bad faith; (2) the ability of the opposing party to pay the fees; (3) whether an award of attorney's fees would deter other persons who will be acting under similar circumstances; (4) whether the party seeking attorney's fees sought to benefit all ERISA participants or beneficiaries or to resolve a significant legal issue; and (5) the relative merits of the parties' positions. Pitts v. American Sec. Life Ins. Co., 931 F.2d 351, 358 (5th Cir. 1991); Iron Workers Local #272 v. Bowen, 624 F.2d 1255, 1266 (5th Cir. 1980). No single factor is necessarily decisive, and some factors may be inapplicable to a specific case, "but together they are the nuclei of concerns that a court should address in applying" ERISA. Wegner v. Standard Ins. Co., 129 F.3d 814, 821 (5th Cir. 1997) (quoting Iron Workers, 624 F.2d at 1266).
III A
The court first considers the degree of the opposing party's culpability or bad faith. A party's conduct may rise to the level of bad faith for egregious conduct, such as the pursuit of frivolous claims or breach of fiduciary duty. See, e.g., Freedman v. Texaco Marine Servs., Inc., 882 F. Supp. 580, 584-585 (E.D. Tex. 1995) (holding that defendant's "indefensible" interpretation of plan could possibly constitute bad faith); Wright v. Nimmons, 641 F. Supp. 1391, 1408 (S.D. Tex. 1986) (stating that defendant who breached fiduciary duty acted in bad faith). A party may still be culpable for conduct that does not rise to the level of bad faith. See, e.g., Dial v. NFL Player Supp. Disability Plan, 174 F.3d 606, 614 (5th Cir. 1999) ("[A]lthough the Court stops short of accusing (defendant] of acting in bad faith, (defendant] is clearly responsible for its erroneous interpretation that was in direct conflict with the plain meaning of the settlement agreement."); Wegner, 129 F.3d at 821 (affirming district court's holding that, although not bad faith, defendant's frivolous justification weighed in favor of awarding attorney's fees); Texas Commerce Bancshares v. Barnes, 798 F. Supp. 1286, 1289 (W.D. Tex. 1992) (finding that "though not necessarily bad faith," defendants' culpability for actions was significant).
In the present case, although Brandon's defenses to liability for the overpayments were not frivolous or apparently advanced in bad faith, they were nevertheless baseless. The first factor weighs in favor of awarding attorney's fees.
B
The second factor takes into account the ability of the opposing party to pay the fees. Brandon has not responded to UNUM's motion and there is no record evidence concerning whether she has the ability to pay a fee award. Because there is circumstantial proof that indicates that she cannot do so (Brandon is disabled under both the policy's definition of disability and the social security definition), the court finds that this factor supports denying attorney's fees.
C
The third factor considers whether an award of attorney's fees would deter other persons who will be acting under similar circumstances. This factor is related to the bad faith component.
Where there is no finding of bad faith or culpability, this factor carries less force because there is no behavior that the court seeks to deter. See Johnson v. Harvey, 1998 WL 781590, at *2 (E.D. La. Nov. 10, 1998) (factor not a significant concern where there has been no adjudication proscribing conduct to be deterred in the future); Hixson v. Liberty Corp., 964 F. Supp. 218, 227 (W.D. La. 1997) ("Because this court does not find bad faith on the part of the defendant, an award of fees would not serve to deter future negative conduct."); Boggs v. Boggs, 1997 WL 627599, at *1 (E.D. La. Oct. 10, 1997) (deterrence factor related to bad faith factor).
In the present case, Brandon signed an agreement by which she recognized that the payment option she selected could result in overpayments and by which she explicitly agreed to repay such overpayments. See UNUM, 1999 WL 956874, at *2. It would deter other plan beneficiaries from making similar choices, and then failing to honor them, if the court not only awards UNUM judgment for the overpayments but also requires that Brandon pay UNUM's attorney's fees. Such an award would make clear that parties cannot explicitly agree to be bound by the payment terms of a policy and then disregard those terms. This factor weighs in favor of an award of fees.
D
Under the fourth factor, the court assesses whether the party seeking attorney's fees sought to benefit all ERISA participants or beneficiaries or to resolve a significant legal issue.
This court did not resolve any significant legal issues in this case. The court simply enforced the unambiguous terms of a policy and agreement. UNUM asserts that it sought in this case to benefit the financial solvency of the employer's ERISA plan, but it has not demonstrated that the employer, rather than UNUM, stood to lose from Brandon's conduct. The court holds that this factor weighs against an award of fees.
E
Under the fifth factor, the court considers the relative merits of the parties' positions. See Sunbeam-Oster Co. Group Benefits Plan v. Whitehurst, 102 F.3d 1368, 1378 (5th Cir. 1996) (affirming denial of award where relative merits of parties' positions "not overwhelmingly stacked" on one side); Izzarelli v. Rexene Prods. Co., 24 F.3d 1506, 1526 (5th Cir. 1994) (where party's claim not groundless, fifth factor does not support fee award); Pitts, 931 F.2d at 358 (affirming denial of fees where there was "some merit to each party's position"). In this case. UNUM was clearly entitled to recover the overpayments. Brandon's defenses were groundless. This factor weighs in favor of awarding UNUM its attorney's fees.
F
Having assessed the factors in the aggregate, the court holds that UNUM should recover its attorney's fees from Brandon. This is a case in which Brandon's obligation to repay the excess payments was clear from the outset, based on options that she herself elected, and in which her defenses were baseless. By awarding UNUM its fees, the court will deter other plan beneficiaries from failing to honor their plan obligations. Brandon has not responded to UNUM's motion and therefore has failed to set out any reasons not to make such an award.
Although the court is concerned that Brandon will be unable to pay UNUM's attorney's fees, the court's conclusion that she lacks the ability to pay the award is based only on circumstantial evidence, absent any response to UNUM's motion. Moreover, most of the relevant factors support awarding UNUM its fees. And if the court were to deny UNUM's fee application solely or primarily on the ground that Brandon is impecunious, it would essentially make that single factor decisive, which is at least disfavored, if not prohibited. See Wegner, 129 F.3d at 821 (holding that in assessing relevant factors, "[n]o one of these factors is necessarily decisive").
IV A
To decide an appropriate attorney's fee award, the court initially calculates a "lodestar fee" by multiplying the number of hours reasonably expended by a reasonable hourly rate. See League of United Latin Am. Citizens #4552 v. Roscoe Indep. Sch. Dist., 119 F.3d 1228, 1232 (5th Cir. 1997). UNUM bears the burden of proving that, and the court must determine whether, the hours claimed were "reasonably expended on the litigation." See Alberti v. Klevenhagen, 896 F.2d 927, 933-34, modified in part on other grounds, 903 F.2d 352 (5th Cir. 1990) (on rehearing); see also Hensley v. Eckerhart, 461 U.S. 424, 434 (1983) ("The district court also should exclude from this initial fee calculation hours that were not `reasonably expended.'"). The court then considers whether the "lodestar amount" should be adjusted depending on the circumstances of the case based on the factors of Johnson v. Georgia Highway Express Inc., 488 F.2d 714 (5th Cir. 1974). See Wegner, 129 F.3d at 822; Johnson, 488 F.2d at 717-19. To determine the lodestar amount, the court multiplies the number of hours reasonably expended by the reasonable hourly rate.
These familiar factors are (1) the time and labor required for litigation; (2) the novelty and complication of the issues; (3) the skill required to properly litigate the issues; (4) whether the attorney had to refuse other work to litigate the case; (5) the attorney's customary fee; (6) whether the fee is fixed or contingent; (7) whether the client or case circumstances imposed any time constraints; (8) the amount involved and the results obtained; (9) the experience, reputation, and ability of the attorneys; (10) whether the case was undesirable; (11) the type of attorney-client relationship and whether the relationship was long-standing; and (12) awards made in similar cases.
As the Fifth Circuit explained in Walker v. United States Dep't of Housing Urban Dev., 99 F.3d 761 (5th Cir. 1996):
The first factor already is included in the lodestar, and the district court must be careful . . . not to double count a Johnson factor already considered in calculating the lodestar [.] The Supreme Court has limited greatly the use of the second, third, eighth, and ninth factors, and we have held that enhancements based upon these factors are only appropriate in rare cases supported by specific evidence in the record and detailed findings by the courts. . . . An enhancement based on the eighth factor is appropriate only when the fee applicant can demonstrate that it is customary in the area for attorneys to charge an additional fee above their hourly rates for an exceptional result[.] . . . The seventh factor is subsumed in the number of hours reasonably expended.Id. at 771-72 (citations, quotations, and footnote omitted); see also Shipes v. Trinity Indus., 987 F.2d 311, 320 (5th Cir. 1993).
The lodestar amount includes the first and seventh Johnson factors.
B
UNUM seeks an award of attorney's fees in the amount of $9,965.00. This sum is calculated based on the following services rendered by attorneys: 4 hours at the rate of $145.00 per hour, 49.9 hours at the rate of $160.00 per hour, and 1.7 hours at the rate of $175.00 per hour for the services of Andrew C. Whitaker, Esq.; ("Whitaker"); 0.7 hours at the rate of $200.00 per hour for Doug K. Butler, Esq.; and 3.6 hours at the rate of $140.00 per hour for Lisa L. Traylor, Esq. See Whitaker Decl. at ¶ 5. UNUM has provided detailed information concerning the services that each attorney rendered. See id. Ex. A (collecting billing statements).UNUM also seeks paralegal fees for Ronnie Waldie ("Waldie") as follows: 2.0 hours at the rate of $70.00 per hour, 0.4 hours at the rate of $85.00 per hour, and 2.7 hours at the rate of $90.00 per hour. Paralegal fees are recoverable as attorney's fees to the extent that the paralegal performs work traditionally done by an attorney. Otherwise, paralegal expenses are unrecoverable overhead expenses. Allen v. United States Steel Corp., 665 F.2d 689, 697 (5th Cir. 1982); Jones v. Armstrong Cork Co., 630 F.2d 324, 325 n. 1 (5th Cir. 1980). UNUM has adduced evidence that Waldie performed tasks that otherwise would have been performed by attorneys at a higher hourly rate. Whitaker Decl. at ¶ 5. It has also set out in detail the services Waldie rendered. See id. Ex. A (collecting billing statements).
Absent any challenge to UNUM's fee application, and based on the court's review of the evidence submitted, the court finds that the services rendered by the attorneys and paralegal were reasonable and necessary and that the hourly rates are reasonable for such services. See id. at ¶ 8 (addressing reasonableness of hourly rates).
The fees detailed in ¶ 5 of Whitaker's declaration actually total slightly less than the total fee sought. See id. UNUM also has set out in detail, however, expenses for long distance, photocopying, postage, and facsimile transmissions that exceed what is necessary to bring the total award up to the amount that is requested. See id. at Ex. A. The court therefore concludes that the total award is supported by the record.
UNUM has also addressed the Johnson factors. See id at ¶¶ 7-9. The court finds that none of these factors warrants an upward or downward adjustment to the lodestar.
* * *
The court has today filed a judgment awarding UNUM attorney's fees in the sum of $9,965.00. See Rule 54(d)(2)(C) (providing that award of attorney's fees shall be set forth in separate judgment).
SO ORDERED.