ERISA Watch – Six-figure Attorneys’ Fees Award Against Unsuccessful Plan Participant

This week’s scary notable decision is Langley v. Howard Hughes Mgmt. Co., LLC, Separation Benefits Plan, No. CV H-13-3595, 2016 WL 6208585 (S.D. Tex. Oct. 24, 2016), where the court issued a decision granting the defendant Plan’s motion for attorneys’ fees against the unsuccessful plaintiff after ruling against him on his claim for separation benefits.  Although the court recognized that this case involved “no novel interpretations of ERISA law,” the Plan’s attorneys spent a lot of time fielding Langley’s many “quarrelsome” claims and spending time on this case took time away from other cases.  The Plan’s attorneys spent 262.8 hours on this case, for which the court awarded rates of $555 to $750 for partners, $290 to $540 for associates, and $275 to $290 for paralegals.  The court awarded a total of $143,814 in fees, which it noted was approximately 56% of the plaintiff’s 2012 salary.  The Fifth Circuit’s a rough neighborhood, in which I will not be trick-or-treating, or filing lawsuits.

The Plaintiff in Horneland v. United of Omaha Life Ins. Co., No. 8:15-CV-1703-T-33TGW, 2016 WL 6125705 (M.D. Fla. Oct. 20, 2016) faired much better.  The court denied United of Omaha’s motion for attorneys’ fees against the unsuccessful disability claimant, recognizing that “this was far from a one-sided frivolous case, rather it was one argued in good faith and based on medical evidence.”  But, the court did award $2,102.90 in costs.

Lastly, on the attorneys’ fee front, in Van Loo v. Cajun Operating Co., No. 14-CV-10604, 2016 WL 6211692 (E.D. Mich. Oct. 25, 2016), the court awarded Plaintiffs $127,623.06 in attorneys’ fees following its grant of summary judgment to Plaintiffs on their claim that Church’s breached a fiduciary duty to the insured by failing to inform her that an evidence of insurability form would be required for the level of coverage she had selected.

Put down the Halloween candy and enjoy the rest of this past week’s cases!

Below is Roberts Disability Law, P.C.’s summary of this past week’s notable ERISA decisions.

Attorneys’ Fees

Fifth Circuit

• Granting Defendant Plan’s motion for attorneys’ fees against the unsuccessful plaintiff in the amount of $143,814, approximately 56% of his 2012 salary. The court approved rates of 262.8 hours on this case. These hours were multiplied by hourly rates of $555 to $750 for partners, $290 to $540 for associates, and $275 to $290 for paralegals.  Langley v. Howard Hughes Mgmt. Co., LLC, Separation Benefits Plan, No. CV H-13-3595, 2016 WL 6208585 (S.D. Tex. Oct. 24, 2016) (Judge Lynn N. Hughes).

Sixth Circuit

• Following grant of summary judgment to Plaintiffs on their claim that Church’s breached a fiduciary duty to the insured by failing to inform her that an evidence of insurability form would be required for the level of coverage she had selected, the court granted in part and denied in part Plaintiffs’ motion for attorneys’ fees and awarded a total of $127,623.06 in attorneys’ fees based on hourly rates of $400 and $225. Van Loo v. Cajun Operating Co., No. 14-CV-10604, 2016 WL 6211692 (E.D. Mich. Oct. 25, 2016) (Judge Laurie J. Michelson).

Eleventh Circuit

• Denying United of Omaha’s motion for attorneys’ fees against the unsuccessful disability claimant, recognizing that “this was far from a one-sided frivolous case, rather it was one argued in good faith and based on medical evidence.” However, pursuant to Rule 54(d)(1) of the Federal Rules of Civil Procedure, costs other than attorneys’ fees shall be allowed in the amount of $2,102.90, which are associated with subpoena fees, copies of medical records, and transcripts.  Horneland v. United of Omaha Life Ins. Co., No. 8:15-CV-1703-T-33TGW, 2016 WL 6125705 (M.D. Fla. Oct. 20, 2016) (Judge Virginia M. Hernandez Covington).

Breach of Fiduciary Duty

Fourth Circuit

• Denying Defendant Marilyn Ward’s Motion to Dismiss Counts I, VII, VIII, IX, and X of the First Amended Complaint. Ward’s status as a directed trustee does not immunize her from liability.  ERISA’s disclosure requirements do not nullify Ward’s fundamental trust law duty to disclose a conflict of interest.  Marking payments with Plan assets is more than a “ministerial function.”  Perez v. Chimes D.C., Inc., No. CV RDB-15-3315, 2016 WL 6124679 (D. Md. Oct. 20, 2016) (Judge Richard D. Bennett).

Sixth Circuit

• Granting Plaintiffs’ motion for reconsideration and partially dismissing Count I only as it relates to allegations regarding both BCBSM’s obligation to pay Medicare-like Rates. Saginaw Chippewa Indian Tribe of Michigan v. Blue Cross Blue Shield of Michigan, No. 16-CV-10317, 2016 WL 6276911 (E.D. Mich. Oct. 27, 2016) (Judge Thomas L. Ludington).

Ninth Circuit

• Finding for the Secretary of the DOL in this ERISA enforcement action concerning the handling of the California Pacific Bank Employee Stock Ownership Plan and its termination. Perez v. California Pac. Bank, No. 13-CV-03792-JD, 2016 WL 6157502 (N.D. Cal. Oct. 24, 2016) (Judge James Donato).

Disability Benefit Claims

Ninth Circuit

• Denying Petition for Panel Rehearing; memorandum disposition filed on July 25, 2016 is withdrawn and replaced with the memorandum disposition submitted simultaneously with this Order. The court held that the district court did not err in not applying equitable tolling or equitable estoppel to Lee’s claim for retaliatory discharge.  Lee v. ING GROEP, N.V., et al, No. 14-15848, __F.App’x__, 2016 WL 6311867 (9th Cir. Oct. 28, 2016) (Before: FARRIS, O’SCANNLAIN, and CHRISTEN, Circuit Judges).

• Affirming the district court’s judgment, after a trial on the administrative record, in favor of United of Omaha Life Insurance Company. The district court did not err by concluding that United used the proper definition of “Usual Occupation” in denying Plaintiff’s claim and it did not err by finding Plaintiff was not totally disabled by fibromyalgia from performing the substantial and material duties of her Usual Occupation.  The district court clearly erred by finding that Plaintiff’s fibromyalgia was a pre-existing condition not covered under the Plan, but the error was harmless.  Leslie v. United of Omaha Life Insurance Company, No. 14-56775, __F.App’x__, 2016 WL 6247131 (9th Cir. Oct. 26, 2016) (Before: TALLMAN, PARKER, and CHRISTEN, Circuit Judges).

Discovery

Sixth Circuit

• In long term disability dispute, the court denied Liberty Life’s motion for a protective order and overruled its objections to the Magistrate Judge’s Supplemental Order requiring Liberty Life to answer an interrogatory regarding the file reviewers who actually participated in the determination of Plaintiff’s claim and limited the discovery request to the previous ten years. Neither the proportional language in Fed. R. Civ. P. 26(b)(1) nor the fact that Liberty Life would have to perform a time-consuming, file-by-file review of numerous claim files warranted a reversal of the Magistrate’s discovery order. Owens v. Liberty Life Assurance Co. of Boston, No. 4:15CV-00071-JHM, 2016 WL 6156182 (W.D. Ky. Oct. 21, 2016) (Judge Joseph H. McKinley, Jr.).

Life Insurance & AD&D Benefit Claims

Tenth Circuit

• Granting petition for rehearing and for en banc rehearing to make changes in a revised decision that includes the following footnote: “Forgery can support various causes of action, but is not a freestanding cause of action in Utah. The mother presumably could have used forgery to support a cognizable cause of action, such as fraud. But in both the amended complaint and her supplemental brief, the mother identified her cause of action as one for forgery.”  Woolf v. Shaela K. Wiggington, et al., No. 15-4142, __F.App’x__, 2016 WL 6236319 (10th Cir. Oct. 25, 2016) (Before LUCERO, MATHESON, and BACHARACH, Circuit Judges).

Medical Benefit Claims

Third Circuit

• The principles of ERISA contract interpretation favor an interpretation in which C.L. was permitted to assign her husband’s benefits under the Plan, thus, HUMC has set forth enough facts to state a claim to relief that is plausible on its face insofar as HUMC has standing to pursue its claim under ERISA. The court granted HUMC’s cross motion to amend its complaint.  HUMC OPCO LLC v. United Benefit Fund, Aetna Health Inc., No. CV 16-168 (KM), 2016 WL 6246352 (D.N.J. Oct. 25, 2016) (Magistrate Judge Michael A. Hammer).

Eighth Circuit

• In suit challenging self-funded medical plan’s denial of benefits under the plan’s illegal activities exclusion for medical care and expenses incurred for injuries participant sustained in explosion while igniting mortar-style firework, holding that: (1) under the plain statutory language of the ACA, the plan was not a “health plan” required to cover essential health benefits; (2) the plan was not subject to state insurance laws, and thus was not a “health insurance issuer” that was required to provide coverage including the essential health benefits package under the ACA; (3) participant stated claim that at least some of medical services for which coverage was denied were emergency services under the ACA; (4) public policy did not require voiding plan’s illegal activities exclusion; (5) as a matter of first impression, participant stated claim that plan was ambiguous as to whether Minnesota, Wisconsin, or Federal law applied to determine what constituted an illegal act under plan’s illegal activities exclusion; and (6) participant failed to allege either fraud or mutual mistake, as required to state claim for equitable reformation of plan.  Henrikson v. Choice Prod. USA, LLC, No. 16-CV-1317 (MJD/LIB), __F.Supp.3d__, 2016 WL 6143357 (D. Minn. Oct. 20, 2016) (Judge Leo I. Brisbois).

Pension Benefit Claims

Ninth Circuit

• In action challenging the administrator’s refusal to actuarially increase the amount of accrued benefit that Allbaugh had earned at normal retirement age for each month that his benefits were withheld as a result his employment beyond normal retirement age, denying Allbaugh’s motion for reconsideration of the class certification order and motion for summary judgment, and granting Defendants’ motion for summary judgment in part. Allbaugh v. California Field Ironworkers Pension Trust, et al., No. 212CV00561JADGWF, 2016 WL 6138244 (D. Nev. Oct. 19, 2016) (Judge Jennifer A. Dorsey).

Pleading Issues & Procedure

Fourth Circuit

• In matter arising out of the decision by NationsBank, a company that subsequently merged with Bank of America, to allow its employees to transfer their 401(k) assets to a cash balance defined benefit plan, denying Defendants’ Motion in Limine to Exclude Expert Testimony of Clark L. Maxam and Lawrence Deutsch. Pender v. Bank of Am. Corp., No. 3:05-CV-00238-GCM, 2016 WL 6133850 (W.D.N.C. Oct. 20, 2016) (Judge Graham Mullen).

Eleventh Circuit

• In a long term disability dispute where Plaintiff seeks a court order requiring a pre-exhaustion neuropsychological IME to be videotaped, the court denied without prejudice Plaintiff’s Motion to Perpetuate Evidence, filed pursuant to Federal Rule of Civil Procedure 27, because the record does not indicate that Prudential has been served and Prudential has not responded to the Motion. Stratigos v. Prudential Ins. Co. of Am., No. 8:16-CV-2780-T-27JSS, 2016 WL 6138662 (M.D. Fla. Oct. 21, 2016) (Magistrate Judge Julie S. Sneed).

Subrogation/Reimbursement Claims

Seventh Circuit

• Affirming dismissal of self-funded ERISA plan’s action against several individual health insurers seeking reimbursement for medical expenses it paid on behalf of beneficiaries covered under both the ERISA plan and the insurers’ policies. The court held that the ERISA plan’s action for declaratory judgment seeking declaration that health insurers were liable for future medical expenses incurred by beneficiaries who were covered by both ERISA plan and health insurance policies was not ripe for review, and as a matter of apparent first impression, relief sought by ERISA plan was legal, and thus not authorized under ERISA.  States, Se. & Sw. Areas Health & Welfare Fund by Bunte v. Am. Int’l Grp., Inc., No. 15-2237, __F.3d__, 2016 WL 6205750 (7th Cir. Oct. 24, 2016) (Before FLAUM, WILLIAMS, and SYKES, Circuit Judges).

Ninth Circuit

• In matter seeking to enforce an ERISA health plan’s reimbursement clause in light of a third-party tort settlement, the court found that although the SPD is the only document detailing the terms of the Plan, and contains provisions giving the Plan the right to reimbursement from third party recoveries, JDA can enforce the reimbursement provision under § 1132(a)(3). The court rejected Defendants argument that (1) they did not promise to reimburse JDA because they did receive a copy of the SPD and (2) the reimbursement provision is unconscionable.  JDA Software Inc. v. Berumen, No. CV-14-01565-PHX-DLR, 2016 WL 6143188 (D. Ariz. Oct. 21, 2016) (Judge Douglas L. Rayes).

Venue

Seventh Circuit

• The court joins the majority of courts that have concluded that ERISA does not preclude forum selection clauses. Lack of notice to Plaintiff about the forum selection clause does not make the clause fundamentally unfair and unenforceable.  The case must be transferred to the Easter District of Missouri because each of the pension plans contains a mandatory forum selection clause requiring all actions relating to or arising under the plans to be resolved in that venue.  Feather v. SSM Health Care, No. 16-CV-393-NJR-SCW, 2016 WL 6235772 (S.D. Ill. Oct. 25, 2016) (Judge Nancy J. Rosenstengel).

Withdrawal Liability & Unpaid Contributions

Second Circuit

• Granting motion to confirm the arbitration award against Defendant TNS Management Services, Inc. Trustees for the Mason Tenders Dist. Council Welfare Fund v. TNS Mgmt. Servs., Inc., No. 16-CV-1120 (AJN), 2016 WL 6208559 (S.D.N.Y. Oct. 20, 2016) (Judge Alison J. Nathan).

Sixth Circuit

• Recommending that the motion for default judgment be granted and judgment be entered against Defendant in the amount of $6,755.70 in liquidated damages, and interest; interest from the date of judgment at the rate of 1% per month; and $400.00 in costs. Boards of Trustees of Ohio Laborers’ Fringe Benefit Programs v. Olive Leaf Landscaping, Inc., No. 2:16-CV-686, 2016 WL 6211329 (S.D. Ohio Oct. 25, 2016) (Magistrate Judge Terence P. Kemp).

Seventh Circuit

• Granting motion for default judgment and ordering Defendant to pay Plaintiffs a total of $37,211.39 in delinquent contributions, penalties, processing fee, attorneys’ fees, and costs. Trustees of the Michiana Area Elec. Workers Health & Welfare Fund v. Vanderheyden, Inc., No. 2:16-CV-0306-PPS-PRC, 2016 WL 6134721 (N.D. Ind. Oct. 21, 2016) (Judge Philip P. Simon).

* Please note that these are only case summaries of decisions as they are reported and do not constitute legal advice.  These summaries are not updated to note any subsequent change in status, including whether a decision is reconsidered or vacated.  If you have questions about how the developing law impacts your ERISA benefit claim, contact an experienced ERISA attorney.  Case summaries authored by Michelle L. Roberts, Partner, Roberts Disability Law, P.C., 1050 Marina Village Pkwy., Ste. 105, Alameda, CA 94501; Tel:  510-230-2090.