Nancy Langston ("Plaintiff") received long term disability benefits ("LTD") under the North American Asset Development Corporation Group Disability Plan ("Plan"), administered by Hartford Insurance Company, ("Hartford"), and governed by ERISA. Hartford terminated Plaintiff's benefits, finding she was no longer disabled. She sued the Plan, seeking reinstatement of benefits.
The Northern District Court of California (Judge Illston) found Hartford failed to make adequate findings to support its decision to discontinue benefits, denied the parties' cross-motions for summary judgment, and remanded the matter to Hartford. On remand, Plaintiff could submit additional information in support of her claim for Hartford to reconsider using the appropriate standard. On reconsideration of Plaintiff's claim, Hartford reinstated benefits.
Plaintiff filed a motion for prejudgment interest, attorney's fees and costs. The Plan argued she was not a "prevailing party" entitled to attorney's fees and costs, because the District Court did not find Hartford's denial of LTD benefits violated ERISA, but rather, remanded to Hartford for reconsideration of the claim.
The District Court held Plaintiff was a prevailing party, and that she did not have to obtain a final judgment on the merits. For purposes of attorney's fees under ERISA, a "prevailing party" is one who achieves a judicially-sanctioned, material change in the legal relationship of the parties. To qualify, Plaintiff had to show she obtained "a material alteration in the legal relationship between the parties and that this material alteration was stamped with some judicial imprimatur." The District Court held she had done so by obtaining a remand order forcing Hartford to reconsider her claim.
Under ERISA, the District Court had discretion to award "reasonable attorney's fee and costs of action." In ERISA cases, the Ninth Circuit uses a five-part test, the Hummell factors, to determine if attorney's fees should be awarded:
1) the degree of the opposing party's culpability or bad faith; 2) the ability of the opposing party to satisfy an award of fees; 3) whether an award of fees against the opposing party would deter others from acting under similar circumstances; 4) whether the party requesting fees sought to benefit all participants and beneficiaries of an ERISA plan or to resolve a significant legal ERISA question; and 5) the relative merits of the parties' positions.
No single factor is necessarily decisive, but the test "should be liberally construed" in favor of protecting plan participants. The District Court found Hartford had some culpability and the first factor weighed in Plaintiff's favor, as well as the fifth factor because Harford reinstated benefits on remand. The District Court gave great weight to the claim administrator's ability to pay, because Hartford conceded it could pay any fees awarded.
The District Court held the third factor weighed in Plaintiff's favor, finding a fee award has deterrence value, because it emphasizes "ERISA plan administrators must conduct adequate investigation and review before discontinuing a plan participant's benefit." The District Court held that, although Plaintiff did not seek benefits on behalf of the Plan, the fourth factor was neutral or weighed slightly in her favor since her "initiative in challenging the plan's decision will benefit participants whose claims might otherwise be denied."
The District Court granted Plaintiff's request for attorney's fees. In ERISA cases, fee awards are calculated using the lodestar method, multiplying the number of hours "reasonably expended on the litigation by a reasonable hourly rate."
The District Court held Plaintiff could recover attorney's fees for work performed by her lawyer related to the administrative review on court-ordered remand. However, the District Court disallowed hours billed by her counsel for time spent preparing material stricken from the record as improper or inadmissible, and reduced hours that constituted "block billing" by 20%.
A party seeking an ERISA fee award "must establish that the rate sought is in line with the fees that private attorneys of an ability and reputation comparable to that of prevailing counsel charge their paying clients for legal work of similar complexity." The District Court found Plaintiff's counsel failed to establish what attorneys actually charge paying clients in similar ERISA cases, and reduced Plaintiff's lead counsel's hourly rate from $550 to $400, and the associate's hourly rate from $450 to $300.
The District Court had discretion to award costs, but only those costs included under 28 U.S.C. § 1920, the statute governing the taxation of costs. The District Court awarded Plaintiff recovery of costs for computer-based legal research (i.e., Westlaw or Lexis charges).
The District Court awarded Plaintiff prejudgment interest at the T-bill rate under 28 U.S.C. § 1961(a), holding such an award to an ERISA plaintiff "is a question of fairness" within the court's discretion, and the T-bill rate prescribed by 29 U.S.C. § 1961 applies unless the equities require otherwise.
Click here for opinion.
This opinion is not final. Though it has been certified for publication, it may be modified on rehearing, or granted review by the Ninth Circuit Court of Appeals. If any of these events occur, the opinion would be unavailable for use as authority in other cases.
This and other case bulletins, as well as other publications of Gordon & Rees LLP, may be found at www.gordonrees.com