District Court Finds Guardian Entitled to Set Off in ERISA Benefits Dispute, But Awards Attorneys’ Fees to Plaintiff

In Rappaport v. Guardian Life Insurance Company of America, No. 1:22-CV-08100 (JLR), 2025 WL 2694252 (S.D.N.Y. Sept. 22, 2025), the U.S. District Court for the Southern District of New York addressed a complex dispute over long-term disability (LTD) benefits under ERISA. The case highlights how courts may interpret plan terms, evaluate alleged overpayments, and apply ERISA’s fee-shifting provision even where the claimant does not achieve a full monetary recovery.

Background

Plaintiff J. Rappaport, a former executive at ICC Mortgage Services, obtained LTD coverage through Guardian in 2005. His income included both W-2 wages and K-1 partnership earnings. Rappaport became disabled in 2015 due to polycythemia vera, a rare leukemia, and Guardian initially approved his LTD claim. It paid the maximum monthly benefit of $10,000 beginning in October 2015. In 2020, Guardian terminated benefits for lack of updated medical proof, later reinstated them briefly, and then cut them off entirely in January 2021. Guardian asserted that Rappaport was capable of earning more than 80% of his “indexed insured earnings” and demanded repayment of over $300,000 in alleged overpaid benefits.

Rappaport sued under ERISA § 502(a)(1)(B) for unpaid benefits and under § 502(a)(3) seeking plan reformation to ensure his K-1 earnings were included in the “insured earnings” definition. Guardian counterclaimed for restitution and set off. At an earlier bench trial, the Court ruled in Rappaport’s favor, finding that the Plan’s insured-earnings definition did include K-1 income, or alternatively that the Plan should be reformed. The matter was remanded for recalculation.

The Court’s Decision

After a second bench trial in September 2025, Judge Jennifer Rochon largely upheld Guardian’s recalculations:

• Insured Earnings: The Court agreed with Guardian that Rappaport’s insured earnings should be based on his 2014 tax returns, not a mix of 2014 and early 2015 income, because only the 2014 data was available at the time of claim.
• Indexing: The Court found that Guardian correctly applied annual CPI-W data to adjust Rappaport’s insured earnings each year, rejecting Rappaport’s argument for a January-to-January approach.
• Monthly Calculations: The Court held that Guardian properly spread K-1 income across the year for 2015 and 2020 when determining whether Rappaport’s disability earnings exceeded 80% of insured earnings. However, the Court identified one error: Guardian failed to calculate benefits for January 13–21, 2021. Correcting this reduced Guardian’s alleged overpayment by $3,000.

Ultimately, the Court concluded Guardian had overpaid $97,297.72 before January 22, 2021, and allowed Guardian to set off that amount against any future LTD payments

Attorneys’ Fees

Although Guardian prevailed on most recalculation and overpayment issues, the Court emphasized that Rappaport secured meaningful relief: recognition that his K-1 partnership income counted toward his “insured earnings,” an issue central to the structure of his LTD benefits. That victory satisfied the “some degree of success on the merits” threshold for a fee award under ERISA § 502(g)(1).

Judge Rochon also applied the Chambless factors, noting the importance of deterring overbroad plan interpretations and Guardian’s ability to bear the cost of fees.

Fee Calculation

Rappaport’s counsel at Riemer Hess sought fees for more than 850 hours of work across four years and two bench trials. The Court carefully reviewed the records and approved the bulk of the request, finding the time and staffing appropriate for the complexity of the litigation.

The Court awarded the following hourly rates:

• Scott Riemer (Founding Partner): $900/hour
• Jennifer Hess (Partner & Lead Counsel): $700/hour
• Matthew Maddox (Former Associate): $575/hour
• Ryan McIntyre (Associate): $500/hour
• Hannah Cochrane (Paralegal): $350/hour
• Michele Wagner (Paralegal): $325/hour
• Samantha Corneille-Renner (Paralegal): $275/hour

These rates reflect an increase over what the same attorneys had been awarded one year earlier in Graziano v. First Unum Life Ins. Co., No. 21-CV-2708 (PAC), 2024 WL 1175143 (S.D.N.Y. Mar. 19, 2024). In Graziano, the court approved rates of $788 for Riemer, $608 for Hess, $540 for Maddox, $432 for McIntyre, and $315–$248 for the paralegals after a 10% reduction.

Judge Rochon acknowledged the upward adjustment but found it justified given the attorneys’ specialized ERISA expertise, the multi-year nature of the litigation, and their proven ability to prevail on significant plan interpretation issues.

After minor deductions for clerical billing, the Court awarded $461,402.78 in attorneys’ fees, plus $402 in costs.