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George J. Zacharkiw v. the Prudential Insurance Company of America

February 21, 2012

GEORGE J. ZACHARKIW
v.
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA



The opinion of the court was delivered by: Legrome D. Davis, J.

MEMORANDUM ORDER

AND NOW, this 21st day of February, 2012, upon consideration of Plaintiff's Second Motion for Attorney's Fees and Costs (Doc. No. 23) and Defendant's Response in Opposition Thereto (Doc. No. 24), it is hereby ORDERED that Plaintiff's Motion for Fees and Costs (Doc. No. 23) is DENIED. The Clerk of Court is directed to close this matter for statistical purposes.

I. Factual Background and Procedural History This ERISA action involves Defendant Prudential Insurance Company of America's ("Prudential" or "Defendant") allegedly improper termination of Plaintiff George J. Zacharkiw's ("Zacharkiw" or "Plaintiff") long-term disability ("LTD") benefits. Zacharkiw suffers from Relapsing Remitting Multiple Sclerosis ("MS"). (Doc. No. 1 ¶¶ 7-9). At the time of his MS diagnosis in December of 2003, Zacharkiw worked as an Associate Director for Navigant Consulting ("Navigant"). (Doc. No. 1 ¶¶ 9-11). As a Navigant employee, Zacharkiw received disability insurance coverage through a plan sponsored by Navigant and insured by Prudential. (Doc. No. 1 ¶ 12).

According to the complaint, Zacharkiw ceased working on July 23, 2007, due to the progression of his MS. (Doc. No. 1 ¶ 14). Prudential initially approved Zacharkiw's LTD benefits claim, and he began receiving such benefits on January 19, 2008. (Doc. No. 1 ¶ 16). However, Prudential terminated Zacharkiw's LTD benefits effective April 1, 2009, finding that Zacharkiw was no longer "disabled" under the plan's definition. (Doc. No. 1 ¶¶ 23-27; Ex. H). Zacharkiw appealed on June 26, 2009, but Prudential upheld its termination decision on September 25, 2009. (Doc. No. 1 ¶¶ 28-38; Ex. K).

Zacharkiw filed a voluntary second appeal with Prudential in early February of 2010 and brought this suit about a week later on February 16, 2010, before the second administrative appeal ran its course. (Doc. No. 9; Doc. No. 24, at 2-3). In conjunction with this second appeal, Zacharkiw submitted a fair amount of new evidence to buttress his disability claim, including records from his neurologist, the results of neuropsychological testing ("NPT"), lab results, x-rays, and an MRI of his brain. (Doc. No. 14, D1045-46). Dr. Edward Murphy, who performed the new NPT, unequivocally supported Zacharkiw's disability claim:

Given the nature of his work, it is my opinion that Mr. Zacharkiw is disabled from returning to active employment. His work involves considerable attention to fine detail as well as a high level of productivity. His most severe deficit on testing is related to his impaired processing abilities. His prognosis for re-employment is poor given the progressive nature of his disease. In addition to his neurocognitive deficits, he has marked symptoms of fatigue which tend to heighten his cognitive impairments. (Doc. No. 14, D1385-91).

In addition, Dr. Murphy's NPT report of November 10, 2009, called into question Zacharkiw's previous NPT results, in which Dr. James Langan opined that Zacharkiw did not put forth a good faith effort on some of the tests and therefore scored lower than he should have. Specifically, Dr. Murphy stated:

I did have an opportunity to review the neuropsychological report by Dr. James Langan dated 02/18/09. I did not see any indication on the current examination of inadequate effort on testing. I did repeat one measure of effort-Test of Memory Malingering. His [Zacharkiw's] performance on this measure suggests no indication of any distortion or exaggeration of his results. (Doc. No. 14, D1385-91). In the past, Prudential had relied on Dr. Langan's assessment of Zacharkiw's malingering to conclude that Zacharkiw was not disabled and therefore not entitled to LTD benefits. (See Doc. No. 1 ¶¶ 26-27, Ex. H).

Zacharkiw's complaint alleges that Prudential violated the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1132(a)(1)(B), by acting in an "arbitrary and capricious manner in terminating [his] long-term disability benefits." (Doc. No. 1 ¶¶ 39-47). On June 1, 2010, several months after Zacharkiw filed suit, the parties jointly petitioned the Court for a stay pending Prudential's decision on Zacharkiw's second appeal, and we granted the stay on June 7, 2010. (Doc. Nos. 9, 10). On September 7, 2010, over one (1) year ago, Prudential reinstated Zacharkiw's LTD benefits. (Doc. Nos. 14, at 3; 17, at 7; 17-1). According to Prudential, it reversed course and reinstated Zacharkiw's benefits based on a "review of the new medical documentation submitted for review on second reconsideration." (Doc. No. 14, D1401-02). Prudential also issued Zacharkiw a check for $121,068.00, apparently as payment for back benefits owed from April of 2009. (Doc. No. 17, at 7 n.3).

Prudential then moved to dismiss Zacharkiw's complaint under Federal Rule of Civil Procedure 12(b)(1) on mootness grounds. We granted the motion but retained limited equitable jurisdiction to decide the collateral issue of attorney's fees and costs. (See Doc. No. 19). Zacharkiw subsequently moved for fees and costs, arguing that he achieved some degree of success on the merits in this matter. For the reasons discussed below, we deny Zacharkiw's motion.

II. Legal Analysis

Under ERISA's flexible fee shifting provision, a "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). However, as a threshold matter, a fee claimant must have achieved "some degree of success on the merits" before a court may award fees and costs. Hardt v. Reliance Standard Life Ins. Co., 130 S. Ct. 2149, 2152 (2010) (citation omitted). The Supreme Court's Hardt decision makes clear that "[a] claimant does not satisfy that requirement by achieving trivial success on the merits or a purely procedural victor[y], but does satisfy it if the court can fairly call the outcome of the litigation some success on the merits without conducting a lengthy inquir[y] into the question whether a particular party's success was substantial or occurred on a central issue." Id. at 2158 (citations and quotations omitted).

The Hardt case, which spawned the "some degree of success on the merits" standard for ERISA fee shifting, involved peculiar facts. At the district court level, Ms. Hardt moved for summary judgment against Reliance, her insurer, arguing that Reliance's decision to deny her benefits was unreasonable as a matter of law. Hardt, 130 S. Ct. at 2154. The district court denied Ms. Hardt's summary judgment motion but remanded the matter to Reliance because, in the court's opinion, Reliance's plan administrators failed to comply with ERISA guidelines, thus depriving Ms. Hardt of a legally sufficient review of her claim. Id. In remanding the matter, the district court found "compelling evidence" in the record that Ms. Hardt was totally disabled and was "inclined to rule" in her favor, but thought it wise to give Reliance a chance to address the deficiencies in its approach first. Id. Accordingly, the court instructed Reliance to act on Ms. Hardt's application after considering all the evidence; otherwise, the court warned, "judgment will be issued in favor of Ms. Hardt." Id. Unsurprisingly, Reliance did as instructed and reinstated Ms. Hardt's benefits. Id.

On these facts, the Supreme Court held that Ms. Hardt had achieved "some success on the merits," which opened the door to an award of fees and costs. Hardt, 130 S. Ct. at 2158-59. However, the Court declined to elaborate on other scenarios that may or may not qualify as "some success on the merits." For example, the Court explicitly left open the question of "whether a remand order, without more, constitutes 'some success on the merits' sufficient to make a party eligible for attorney's fees under ยง 1132(g)(1)." Id. at 2159. In light of the Court's narrow holding in Hardt, one ...


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