United States District Court, W.D. Pennsylvania
OPINION AND ORDER ON PLAINTIFF'S MOTION FOR ATTORNEYS' FEES & COSTS
LISA PUPO LENIHAN, Chief Magistrate Judge.
Presently before the Court is Plaintiff's Motion for Attorneys' Fees and Costs (ECF No. 42) pursuant to Federal Rule of Civil Procedure 54 and 29 U.S.C. § 1132(g)(1). Section 502(g)(1) of ERISA provides, in relevant part: "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) (2012). Thus, a district court has discretion to award attorney's fees and costs to either party in an ERISA action, and any such award may only be reversed for abuse of discretion. McPherson v. Employees' Pension Plan of Am. Re-Ins. Co., Inc., 33 F.3d 253, 256 (3d Cir. 1994).
Recently, the Supreme Court delineated a threshold requirement that must be satisfied in order to award attorneys' fees in ERISA cases:
[A] fees claimant must show "some degree of success on the merits" before a court may award attorney's fees under § 1132(g)(1). 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.'"
Hardt v. Reliance Std. Life Ins. Co., 560 U.S. 242, 255 (2010) (quoting Ruckelshaus v. Sierra Club, 463 U.S. 680, 688 n. 9 & 694 (1983)) (footnote omitted).
Once the court has determined that the party requesting fees has met the "some success on the merits" requirement, precedent in this circuit requires the district court to then apply the five factor test delineated in Ursic v. Bethlehem Mines, 719 F.2d 670, 673 (3d Cir. 1983) to determine whether to exercise its discretion to award attorneys' fees under Section 1132(g)(1). Ellison v. Shenango Inc. Pension Bd., 956 F.2d 1268, 1273 (3d Cir. 1992) ("This Court [of Appeals] has consistently used the Ursic factors to evaluate whether a district court has abused its discretion in awarding attorney's fees under ERISA.") (citations omitted); see also Nat'l Sec. Sys., Inc. v. Iola, 700 F.3d 65, 103-04 (3d Cir. 2012). Finally, if the court determines that an award of attorneys' fees is warranted under Ursic, the court must then consider whether the amount requested is reasonable. Hahnemann Univ. Hosp. v. All Shore, Inc., 514 F.3d 300, 310 (3d Cir. 2008).
I. STATEMENT OF RELEVANT FACTS AND PROCEDURAL HISTORY
Plaintiff, Jason Berkoben ("Berkoben") filed this lawsuit against Defendant Aetna Life Insurance Company ("Aetna") to reinstate long-term disability ("LTD") payments that had been terminated under Aetna's 24-month limitation on LTD benefits for mental illness. At the close of discovery Berkoben and Aetna filed cross Motions for Summary Judgment. (ECF Nos. 21 & 22). The undersigned filed her Report and Recommendation on February 21, 2014, in which she recommended that Plaintiff's request for reversal and retroactive reinstatement of LTD benefits be denied, but that Plaintiff's summary judgment motion be granted in all other respects. (ECF No. 35). Defendant's Motion for Summary Judgment was denied, and the undersigned further recommended that Aetna's decision to terminate Berkoben's LTD benefits be vacated and the case remanded back to the Plan Administrator for further consideration in light of the Report and Recommendation (ECF No. 35).
In particular, the Report and Recommendation found:
... counsel's appeal letter clearly puts Aetna on notice that Plaintiff is pursuing the exclusion to the limitation - where the mental condition is characterized by structural brain damage. Yet Aetna states that it is upholding its decision to terminate Plaintiff's benefits based on its conclusion that schizophrenia and bipolar disorder are still classified as mental/nervous conditions. This conclusion is unreasonable because it ignores Plaintiff's clearly stated position - that his disabling condition is characterized by structural brain damage and thus is excluded from the 24-month limitation period.
... Aetna's conclusion in its termination letter and final denial letter is contrary to its own internal List, which acknowledges that many mental/nervous conditions, including schizophrenia, have recognized structural brain damage, and excludes those conditions from the 24-month mental health limitation. (LTD 781-000784.)
It is clear from the record that Aetna did not comply with the notice requirements of ERISA, as it (1) failed to inform Berkoben of one of the specific reasons for its termination of his benefits - reliance on its internal List and its referrals to Burdick and Mendelssen; (2) failed to inform him of certain critical evidence it relied upon - the internal List and the opinions of Burdick and Mendelssen; and (3) failed to provide him with the opportunity to examine this evidence and submit written comments or rebuttal evidence. Although Aetna is correct that it need not detail every piece of evidence upon which it relied in reaching its decision, failure to inform Plaintiff of evidence which is critical to its decision runs afoul of 29 C.F.R. § 2560.503-1(g)(1). In particular, subsection (g)(1)(v)(A) requires the administrator to provide a plan participant with a copy of any internal policies or guidelines upon which it relies - Aetna's List falls within this subsection - with its denial letter. Aetna admits that it only provided a copy of its List to Plaintiff prior to the initial briefing schedule in this federal action. Def.s Reply Br. at 4 (ECF No. 34). Thus, Plaintiff had no opportunity to respond to it or provide any rebuttal evidence at the administrative review level. Moreover, because Aetna relied on the List in terminating Plaintiff's benefits, the regulation requires Aetna to provide the List. R&R at 31-32.
The Court also finds that Aetna's failure to explain why it gave less weight to Dr. Galonski's report and medical literature, especially in light of Dr. Gerson's concurrence with her opinion, as well as its failure to ask Dr. Gerson an appropriate follow up question - whether Plaintiff's disabling conditions are characterized by structural brain damage - are indicative of self-serving selectivity and thus show evidence of bias. Dr. Galonski is a psychiatrist who had been treating Plaintiff on a monthly basis for the better part of two years when she was asked to submit her narrative report in support of Plaintiff's administrative appeal. Neither Mr. Burdick nor Dr. Mendelssen contradict Dr. Galonski as they were not asked to opine on the very issue that Dr. Galonski opined. Thus, the administrative record does not contain any medical evidence that undermines Dr. Galonski's report.
Thus, the Court finds that there is evidence of bias from the procedural irregularities noted above which supports the conclusion that Aetna abused its discretion in terminating Plaintiff's LTD benefits. R&R at 33-35.
Thus, the only evidence that supports Aetna's decision to terminate Plaintiff's benefits is its own List, but it failed to specify that as a reason for its decision to terminate benefits and failed to provide Plaintiff with a copy of the List with its termination letter. Although the Plan gives Aetna the authority to establish policies and guidelines for administering claims and determining eligibility, a procedural irregularity exists where the administrator relies on an internal policy that lacks any apparent medical, psychiatric, or scientific authority for which mental disorders are included on the exclusions list and which are not. Thus, Aetna's List cannot be construed as "medical evidence, " and Aetna's reliance on it, while excluding the unfavorable portions of the psychiatric opinions of Drs. Galonski and Gerson, the medical literature and the DSM-IV, was unreasonable. R&R at 39-40.
Accordingly, the Court finds that Aetna's decision to terminate Plaintiff's LTD benefits is not supported by substantial evidence as no reasonable person could agree with Aetna's decision based on the evidence in the administrative record. Thus, the Court concludes that Aetna abused its discretion in terminating Plaintiff's benefits. R&R at 43-44.
After a de novo review of Aetna's objections to the Report and Recommendation, Judge Hornak added:
While this Court adopts the Report and Recommendation in its entirety, I consider it to be a close call as to whether benefits must be reinstated pending the results of the administrative remand. Given what this Court considers to be a fundamental failure to fully consider, on the administrative record, all of the language of the Policy provision at issue, it would not be at all inappropriate that the Defendant should bear the burden of providing continued benefits during the remand process that is attendant to that failure. Miller v. American Airlines, Inc., 632 F.3d 837, 856-7 (3d Cir. 2011). By the same token, a review of the correspondence from the Plaintiff's treating physician, Dr. Galonski, reveals that she was not completely precise in tying together her observations about this Plaintiff and his condition with the medical literature that she cites relative to an organic underpinning for such conditions. In the context of all of the medical documentation in the administrative record, the Court concludes that the prudent course at this juncture is to remand for a prompt consideration of the matter at the administrative level, as recommended by the Chief Magistrate Judge.
Mem. Order at 3-4 n. 2, ECF No. 41. Subsequently, Plaintiff filed a timely Motion for Attorney's Fees and Costs and supporting documents, to which Defendant filed a Brief in Opposition. Thus, the motion is ripe for disposition.
A. Whether Plaintiff's Counsel is Entitled to an Award of Attorneys' Fees & Costs
1. Some Degree of Success on the Merits
In Hardt, the Supreme Court emphasized that it was not deciding "whether a remand order, without more, constitutes some success on the merits' sufficient to make a party eligible for attorney's fees under § 1132(g)(1)[, ]" because the circumstances of that case demonstrated that the plaintiff had achieved "some degree of success on the merits." 560 U.S. at 256. The first indicia of success on the merits noted by the Supreme Court was the district court's determination that "the plan administrator [ ] failed to comply with the ERISA guidelines and that [the plaintiff] did not get the kind of review to which she was entitled under applicable law." Id. at 255 (internal quotation marks omitted). The second indicia of success noted by the Supreme Court was that the district court found compelling evidence that plaintiff was totally disabled and opined that it was "inclined to rule in [her] favor" on her disability benefits claim, even though it denied summary judgment for plaintiff, in order to "first giv[e the plan administrator] the chance to address the deficiencies in its statutorily mandated full and fair review of that claim." Id. at 256 (internal quotation marks omitted). The next indicia of success was the district court's order instructing the defendant "to act on [plaintiff's] application by adequately considering all the evidence within 30 days[, ]" and if defendant failed to do so, the court would issue judgment in favor of plaintiff. Id. (internal quotation marks omitted). Finally, the Supreme Court noted that defendant actually reversed its decision and awarded to plaintiff the benefits she sought after conducting the court-ordered review. Id.
Plaintiff argues that he should be awarded attorney's fees and related costs "remanding [his] claim back to Aetna for proper consideration of his any occupation disability status secondary to his schizoaffective disorder, although not the remedy sought by [him], is clearly a victory for [him] and much, much more than just some success on the merits.'" Pl.'s Mot. for Attorneys' Fees at 4. In support of its position, Plaintiff primarily relies on Hardt, supra , and Olds v. Ret. Plan of Int'l Paper Co., Inc., Civ. A. No. 09-0192-WS-N, 2011 WL 2160264 (S.D. Ala. June 1, 2011). The Court notes that the U.S. Court of Appeals for the Third Circuit has yet to weigh in on the issue presented here.
Although not binding on this Court, the Alabama District Court's decision in Olds is instructive. Like Aetna, the plan administrator in Olds argued that the remand order did not achieve "some success on the merits" because it did not direct the plan to award benefits or indicate that benefits should be awarded, nor did the plaintiff seek remand but argued affirmatively against it. Olds, 2011 WL 2160264, at *2. The Olds court disagreed, opining:
The Hardt Court borrowed its standard from Ruckelshaus v. Sierra Club, 463 U.S. 680 (1983). Lower court cases citing these Supreme Court authorities have usually concluded that a remand to the defendant to conduct further administrative proceedings is not a merely procedural victory but reflects a sufficient degree of success on the merits to qualify for an award of fees and expenses.
Missing from most of these and other cases is a thoughtful consideration of what the term "merits" denotes. The answer lies in Ruckelshaus, where the Court made clear that "merits" refers to "the merits of [a party's] claims" and that "claims" are the claims asserted in the litigation. 463 U.S. at 681-82. Thus, a plaintiff has experienced "some degree of success on the merits" when he presents a claim that the defendant violated his rights and the court rules that the defendant did violate those rights. That is precisely what occurred here: among other arguments, the plaintiff claimed that the Plan violated his statutory right to a full and fair review, and the Court held that the Plan did indeed violate that right.
That the relief the plaintiff received on this meritorious claim is a full and fair administrative review rather than a guaranteed award of benefits at the judicial or administrative level may speak to the quantum of his success on the merits of his claim, but it does not convert his substantial success on that claim into failure or trivial success. In Ruckelshaus, for example - which serves as Hardt's template for construction of Section 1132(g)(1) - the Court confirmed that a provision awarding fees "whenever... appropriate" extends "to suits that forced defendants to abandon illegal conduct." 463 U.S. at 686 n. 8. The Court's order commanding the Plan to provide the plaintiff a full and fair review forces the Plan to abandon its illegal conduct of not providing the plaintiff such a review. Nothing in Hardt or Ruckelshaus supports the Plan's ipse dixit that only an actual or guaranteed award of benefits constitutes "some degree of success on the merits."
Id. at *2-*3 (internal citations and footnote omitted).
The Olds court also rejected the plan's argument that a remand for further administrative proceedings is a "purely procedural victory." In doing so, the court distinguished procedural remedies from purely procedural victories, explaining that "[p]rocedural victories are those a party obtains in the course of the litigation but that do not result in any success on the litigated claim itself. Procedural remedies, in contrast, follow a substantive victory, which victory necessarily reflects some degree of success on the merits of the litigated claim." Id. at *3 (citing Chem. Mfrs. Ass'n v. U.S. Envtl. Prot. Agency, 885 F.2d 1276, 1279 (5th Cir. 1989)) (footnote omitted). See also Scott v. PNC Bank Corp. & Affiliates Long Term Disability Plan, No. WDQ-09-3239, 2011 WL 2601569, *8 (D. Md. June 28, 2011) ("To determine whether a remand is appropriate, the court reviews the plaintiff's claim and the evidence presented to the plan administrator regarding the plaintiff's disability. Put another way, the court considers the merits of the case and reaches it conclusion on that basis. Although a remand to a plan administrator may not resolve the plaintiff's disability claim, it fully resolves the litigation and therefore is more than just a procedural victory.") (citing Olds, 2011 WL 2160264, at *3 & n. 2).
Finally, the court in Olds rejected the plan's argument that because the plaintiff did not seek a remand, a remand cannot constitute a subjective success for him. In so doing, the Olds court reasoned that "remand rather than immediate award may temper the degree of success the plaintiff has obtained, but it does not eliminate the success he received from a judicial finding that the Plan violated his statutory rights and a judicial command to re-evaluate his claim in accordance with law." Id. at *3. The Court finds the reasoning of Olds persuasive and adopts it here.
In opposition, Aetna attempts to distinguish Olds based on a difference in the conduct giving rise to the district court's finding that the administrator was in gross violation of ERISA. (Def.'s Mem. in Opp'n at 5.) This is a distinction without a difference. The decisive factor in this case and in Olds was the determination that the administrator violated the statutory requirements of ERISA, resulting in a failure to afford the plaintiff with the requisite "full and fair review" of his claim, not the exact conduct giving rise to the violation. Thus, Aetna's attempt falls short of the mark.
Perhaps realizing the futility of its argument, Aetna instead relies on two district court cases from this circuit - Staats v. Procter & Gamble Long Term Disability Allowance Plan, Civ. A. No. 11-1320, 2012 WL 3705000 (W.D.Pa. Aug. 27, 2012), and Zacharkiw v. The Prudential Insurance Co. of America, Civ. A. No. 10-cv-0639, 2012 WL 551639 (E.D.Pa. Feb.21, 2012), as well as several decisions from courts outside this circuit, to support its argument that the result here - a remand to the plan administrator for further consideration - was purely a procedural victory, which does not satisfy the requirement of "some success on the merits." The Court rejects this argument for the same reasons as those set forth by the district court in Olds. Moreover, unlike the case at bar, both Staats and Zacharkiw involved purely procedural victories. In those cases, the plan administrators denied and/or terminated the plaintiffs' long-term disability benefits. After plaintiffs initiated federal ERISA actions, plaintiffs voluntarily submitted new evidence, including additional medical records, to the plan administrators for review, to buttress their disability claims. While the federal actions were pending, the parties petitioned for and were granted stays to allow the plan administrators' time to review the new evidence and issue a decision. Subsequently, the administrators voluntarily awarded benefits to plaintiffs in both cases, based on their reviews of the newly submitted medical records. Thus, the court in both Staats and Zacharkiw made no substantive determinations on the merits and the parties resolved their disputes at the administrative level without any input from the court. Accordingly, the court in Staats and Zacharkiw found plaintiffs had not achieved the requisite success on the merits under Hardt and declined to award attorneys' fees. Staats, 2012 WL ...