SAUNDRA BROWN ARMSTRONG, District Judge.
Pursuant to the Court's Order of Reference (Docket 107), Magistrate Judge Joseph C. Spero issued a Report and Recommendation in which he recommends granting Plaintiff's Motion for Attorneys' Fees and Costs (Docket 100) and awarding $156,720.00 in attorneys' fees, $8,095.18 in litigation expenses, and $35,753.40 in prejudgment interest to Plaintiffs. Although no objections have been filed, this Court reviews Magistrate Judge Spero's legal conclusions de novo. See Lorin Corp. v. Goto & Co., Ltd., 700 F.2d 1202, 1206 (9th Cir.1983). Upon such review, the Court finds no error in Magistrate Judge Spero's Report and Recommendation. Accordingly,
IT IS HEREBY ORDERED THAT Magistrate Judge Spero's Report and Recommendation (Docket 117) is ACCEPTED
IT IS SO ORDERED.
JOSEPH C. SPERO, United States Magistrate Judge.
Plaintiff Brent Oster ("Oster") brought this action under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001, et seq., seeking reversal of the Defendant Standard Insurance Company's ("Standard") claim decision regarding Plaintiffs eligibility for disability benefits under his employer Lucasfilm Ltd.'s long term disability plan ("the Plan"). Plaintiffs claim is asserted under the Employee Retirement Income Security Act of 1974 ("ERISA"). The parties filed cross-motions for judgment as a matter of law under Federal Rule of Civil Procedure 52. The District Court entered judgment as a matter of law in favor of Plaintiff in an order filed on December 15, 2010, and judgment was entered on December 28, 2010. Subsequently, on January 5, 2011, the District Court issued its Findings of Fact and Conclusions of Law, setting for the bases for its earlier decision. Docket No. 99. On January 11, 2011, Plaintiff filed the instant motion ("the Motion"), requesting an award of attorneys' fees pursuant to 29 U.S.C. § 1132(g). Defendants oppose the motion in part. The District Court referred the matter to the undersigned for a Report and Recommendation. See Docket No. 107.
The Court finds that the Motion is suitable for determination without oral argument, pursuant to Civil Local Rule 7-1(b). Accordingly, the hearing set for April 8, 2011 is VACATED. For the reasons stated below, it is recommended that the Motion be GRANTED IN PART.
On January 5, 2011, the District Court issued its Findings of Fact and Conclusions of Law, granting Plaintiffs Motion for Judgment and denying Defendants' Motion pursuant to Rule 52(a)(1) of the Federal Rules of Civil Procedure. Docket No. 99. The Court held that Standard's denial of long term disability benefits had to be "viewed with [] high skepticism" because financial compensation of Dr. Dickerman, Dr. Toenniessen and United Review Services showed that Standard "failed to use a truly independent medical examiner or a neutral independent review." Id., ¶ 68 (citing Abatie v. Alta Health Ins. Co., 458 F.3d 955, 969 n. 7 (9th Cir.2006)) (en banc). The Court found that Standard improperly discounted the evidence that Plaintiff submitted with his appeal, demonstrating an abuse of discretion. Id., ¶ 69 (citing Black & Decker Disability Plan v. Nord, 538 U.S. 822, 123 S.Ct. 1965, 155 L.Ed.2d 1034 (2003) and 29 C.F.R. § 2560.503-1(h)(2)(iv)). The Court also held that Standard abused its discretion by failing to find Plaintiff disabled in light of his failed employment at Radical, and by failing to consider whether he remained disabled from his own occupation, contrary to the requirements of its own claims manual procedures. Id., ¶ 70-71.
The Court concluded that Standard's handling of Plaintiffs claim and appeal demonstrated bias (id. ¶ 74) and that it had not fulfilled its duty as an ERISA fiduciary:
Id., ¶ 76. Judgment was entered on December 28, 2010, awarding Mr. Oster $153,973.77 in past benefits from July 7, 2004 to April 13, 2008. See Docket No. 98.
Plaintiff argues that he is entitled to reasonable attorneys' fees and costs as the prevailing party because there are no special circumstances that would render such an award unjust. Plaintiff further argues for prejudgment interest, and for fees and costs incurred in filing the present Motion.
Defendants oppose the motion in part. Defendants agree that Plaintiff is entitled to $148,560.00 in attorneys' fees and $8,533.55 in costs. Defendants argue that Plaintiff is limited to fees and costs incurred during the present litigation, and that Plaintiff is not entitled to fees and costs incurred during the administrative proceedings that preceded the litigation here. Defendants also oppose Plaintiffs request for prejudgment interest on the ground that the prejudgment interest should have been included in the original judgment, and any request for pre-judgment interest now constitutes an untimely motion to amend the judgment and is procedurally barred. In their opposition, Defendants ask for fees and costs incurred in opposing the Motion for Attorneys' Fees on the ground that Plaintiff failed to properly meet and confer prior to filing the present Motion. Plaintiff opposes Defendants' request for these fees and costs.
In the Motion, Plaintiff requests an award of attorneys' fees under ERISA's attorney fee provision, 29 U.S.C. § 1132(g), because he achieved complete success in the case and the factors set forth by the Ninth Circuit in Hummell v. Rykoff & Co., 634 F.2d 446, 453 (9th Cir. 1980) support an award of fees and costs.
Section 502(g)(1) of ERISA gives the court discretion to award attorney's fees. 29 U.S.C. § 1132(g)(1). The Supreme Court recently held that a fee claimant may be entitled to attorney's fees if the claimant shows "`some degree of success on the merits'" in order to warrant attorney's fees. Hardt v. Reliance Standard Life Ins. Co., ___ U.S. ___, 130 S.Ct. 2149, 2158, 176 L.Ed.2d 998 (2010). In addition, the Ninth Circuit has held that a prevailing plan participant such as Plaintiff "should ordinarily recover an attorney's fee unless special circumstances would render such an award unjust." Smith v. CMTA-IAM Pension Trust, 746 F.2d 587, 589 (9th Cir.1984) (internal quotations omitted); see also Boston Mut. Ins. v. Murphree, 242 F.3d 899, 904 (9th Cir.2001) ("We ordinarily grant a prevailing beneficiary in an ERISA action reasonable attorneys' fees and costs, absent special circumstances cautioning against it."). As the Ninth Circuit explained, ERISA "is remedial legislation which should be liberally construed in favor of protecting participants in employee benefit plans" and, specifically, "to afford them effective access to federal courts." Smith, 746 F.2d at 589.
Applying the law to the facts of this case, there are no special circumstances that would prevent Plaintiff from recovering attorney's fees. Given that Plaintiff is the prevailing party, he "should ordinarily recover an attorney's fee unless special circumstances would render such an award unjust." Smith, 746 F.2d at 589.
Moreover, Defendants do not oppose Plaintiffs entitlement to fees; rather, Defendants dispute the amount to be awarded. Accordingly, for the reasons stated above, and due to Defendants' non-opposition, the Court finds that Plaintiff is entitled to attorneys' fees.
Under 29 U.S.C. § 1132(g), a court in its discretion may award reasonable attorneys' fees and costs of an action by a plan participant to either party. The Ninth Circuit has held that in exercising this discretion, district courts should consider the following factors:
Hummell v. S.E. Rykoff & Co., 634 F.2d 446, 453 (9th Cir.1980). "No one of the Hummell factors . . . is necessarily decisive, and some may not be pertinent in a given case." Carpenters Southern California Administrative Corp. v. Russell, 726 F.2d 1410, 1416 (9th Cir.,1984). Courts generally construe the Hummell factors in favor of participants in employee benefit plans. McElwaine v. U.S. West, Inc., 176 F.3d 1167, 1172 (9th Cir.1999) ("When we apply the Hummell factors, we must keep at the forefront ERISA's purposes that `should be liberally construed in favor of protecting participants in employee benefit plans'"). Plaintiff argues that each of
Applying the Hummell analysis here, the Court concludes that the factors weigh in favor of awarding Plaintiff his attorneys' fees and costs. The first Hummell factor supports a fee award, as the District Court made Standard's culpability clear when it stated that Standard treated Plaintiff "as an adversary" during the claims process, and violated its legal duties to Plaintiff under ERISA.
The Court finds that the third factor—the degree to which an award will deter future conduct—also favors awarding fees to Plaintiff. ERISA does not authorize an award of compensatory or punitive damages for bad faith behavior. See Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 147, 105 S.Ct. 3085, 87 L.Ed.2d 96 (1985) (holding compensatory and punitive damages not available remedies for ERISA benefit claims). As a result, courts acknowledge that an award of attorneys' fees and costs is a way of deterring violations of ERISA. See e.g., Caplan, 573 F.Supp.2d at 1248 ("[A]n award of attorneys' fees could serve to deter other plan administrators from denying meritorious disability claims. This could indirectly benefit other individuals."); see also Carpenters Southern California Admin. Corp. v. Russell, 726 F.2d 1410, 1416 (9th Cir.1984) ("If defendant employers face the prospect of paying attorney's fees for successful plaintiffs, they will have added incentive to comply with ERISA").
Here, an award of attorney's fees and expenses will deter Standard and other insurers from terminating valid disability claims and from, as the District Court found, demonstrating bias during the claims process. See Docket No. 99, ¶ 74.
In addition, the fourth factor—whether relief sought to benefit other participants or resolve a significant legal question regarding ERISA—favors Plaintiff, as the outcome of this lawsuit could have a deterrent effect on Standard and other insurers'
The Court's January 5, 2011 Findings of Fact will benefit other ERISA insureds in other disability cases where the there is a contradiction between an insurer's neuropsychologist evaluation report's conclusions and the raw data contained in the evaluation. See Docket No. 99, ¶ 72. The Order also provides guidance regarding an insurer's violation of its own claim manual provisions constituting an abuse of discretion. Id., ¶ 71.
Finally, the fifth factor-the relative merits of the parties' positions—favors a fee award. The Court found in its Findings of Fact that Standard "did not comply with its obligation as an ERISA fiduciary" and that "its treatment of Oster as an adversary during the claims process casts doubt on the credibility of its decision on appeal." The District Court found "compelling evidence of bias" during the claims handling process. Docket No. 99, ¶¶ 76, 74. The Court concludes that the Hummell factors support an award of fees in this case.
Having found entitlement to fees and costs, the Court turns to the appropriate amount to be awarded in this case. The amount of fees to be awarded is the heart of the parties' dispute.
In ERISA cases, attorneys' fees to a prevailing plaintiff are determined by a lodestar analysis, multiplying the number of hours reasonably expended on the matter by a reasonable hourly rate. Hensley v. Eckerhart, 461 U.S. 424, 433, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983); D'Emanuele v. Montgomery Ward & Co., Inc., 904 F.2d 1379, 1383 (9th Cir.1990) overruled on other grounds by Burlington v. Dague, 505 U.S. 557, 112 S.Ct. 2638, 120 L.Ed.2d 449 (1992). The Court finds that the hours expended by Plaintiff's attorneys in this litigation were reasonable, and the requested rates are the prevailing rates in the community for ERISA attorneys with their experience and qualifications. The Court declines, however, to recommend an award of attorneys' fees and costs incurred during the administrative appeals process that preceded the present litigation.
The "reasonable hourly rate" is calculated "according to the prevailing market rates in the relevant community. . . ." Blum v. Stenson, 465 U.S. 886, 896-96, 104 S.Ct. 1541, 79 L.Ed.2d 891 (1984). "To inform and assist the court in the exercise of its discretion, the burden is on the fee applicant to produce satisfactory evidence—in addition to the attorney's own affidavits—that the requested rates are in one with those prevailing in the community for similar services by lawyers of reasonably comparable skill, experience and reputation." Id. at 896, n. 11, 104 S.Ct. 1541. "Affidavits of the plaintiff['s] attorney and other attorneys regarding prevailing fees in the community . . . are satisfactory evidence of the prevailing market rate." United Steelworkers of America v. Phelps Dodge Corp., 896 F.2d 403, 407 (9th Cir. 1990). In the absence of opposing evidence, the proposed rates are presumed reasonable. Id.
Plaintiff seeks the following hourly rates: $600 for partner Terrence J. Coleman, $400 for associates Brian H. Kim and David Lilienstein and $150 for paralegals. The Court finds that the experience,
Mr. Kim and Mr. Lilienstein's requested rates of $400 per hour are similarly reasonable, given the hourly rates awarded to attorneys with similar experience. In Caplan v. CNA Financial Corp., 573 F.Supp.2d 1244, 1249 (N.D.Cal.2008) the court approved an hourly rate of $575 for attorney Daniel Feinberg. It also approved an hourly rate of $350 for a sixthyear associate, $330 for a fourth-year associate, and $200 for law student clerks. Id. In comparison, Mr. Kim and Mr. Lilienstein have each been practicing law for ten years and each have significant ERISA experience. Coleman Decl., ¶ 9; Kim Decl., ¶¶ 2-3. Moreover, the Northern District upheld the hourly rates of $500 for Mr. Coleman, and $300 for Mr. Kim in a 2009 order granting attorney's fees in an ERISA benefits case. Coleman Decl., ¶ 12, Exh. D; Fontana v. Guardian Life Ins., 2009 WL 585811 (N.D.Cal., March 4, 2009).
Finally, Defendants do not rebut Plaintiff's evidence of the reasonableness of the rates sought by Plaintiff in this case. See Camacho v. Bridgeport Fin., Inc., 523 F.3d 973, 980 (9th Cir.2008) ("The party opposing the fee application has a burden of rebuttal that requires submission of evidence to the district court challenging the accuracy and reasonableness of the facts asserted by the prevailing party in its submitted affidavits.") (citation and alteration omitted).
Based upon the declarations submitted by Plaintiff and the absence of any contrary evidence submitted by the Defendants, the Court finds that the hourly
In Hensley, supra, the Supreme Court held that in determining the reasonable time expended for calculation of statutory fees to prevailing plaintiffs, courts should generally award a compensatory fee that encompasses "all hours reasonably expended on the litigation." Hensley, 461 U.S. at 435, 103 S.Ct. 1933. The Court stated:
Id.
Here, Plaintiff's counsel obtained excellent results (in that he received all of the past benefits owed to him). Standard's adversarial handling of Plaintiff's claim required an internal appeal that lasted for three years, during which time Standard "add[ed] rationales for its denial. . . without providing [Plaintiff] an opportunity to respond." Docket No. 99, ¶ 73. Standard's denial of the appeal required lengthy and protracted litigation in this case, and the Defendants contested the case at every stage of the litigation.
Moreover, the District Court acknowledged that Standard treated Plaintiff "as an adversary during the claims process." Docket No. 99, ¶ 76. Given the lengthy and contested claims process and contested litigation, the Court finds that the time spent by Plaintiff's counsel in order to litigate this case to its successful completion was reasonable. Courts have acknowledged that "[p]laintiffs in ERISA matters generally must spend a great amount of time preparing for conferences and other proceedings because ERISA cases tend to be factually intensive." Mogck v. Unum Life Ins. Co. of Amer., 289 F.Supp.2d 1181, 1192 (S.D.Cal.2003) (approving an award of $295,774.99 for ERISA claim when claim settled before trial). Like Mogck, this case was factually intensive; unlike Mogck, it proceeded through to Motion for Judgment. Plaintiff's ERISA specialists confirm the factintensive nature and the legal complexities of ERISA cases such as this one. See Kantor Decl., ¶ 8.
Plaintiff has submitted two exhibits along with the Coleman Declaration, A and B, which detail the fees incurred during the two phases of this case. Exhibit A shows the fees incurred during the course of the two internal appeals that Plaintiff was required to file with Standard before initiating the present litigation, and Exhibit B details the fees and costs incurred in connection with the litigation. See Coleman Decl., ¶ 10. Each entry shows the dates on which services were performed, the name of the attorney or paralegal performing the service, the task or series of tasks completed, and the time spent. Entries that reflected communications protected by the attorney-client privilege were redacted. These exhibits to the Coleman Declaration show the actual work performed in this case since the date of the filing of the complaint through to January
Despite the fact that Plaintiff's billing records establish that the internal appeals process involved extensive hours and caused Plaintiffs counsel to incur significant costs and fees, the Court concludes that controlling Ninth Circuit law prevents Plaintiff from recovering attorneys' fees incurred in connection with the internal appeals process. As counsel for Plaintiff acknowledges, the Ninth Circuit has held that ERISA claimants are not entitled to attorney's fees incurred during the mandatory internal appeals process. Cann v. Carpenters' Pension Trust Fund for Northern California, 989 F.2d 313, 315-17 (9th Cir.1993). Plaintiff addresses this Ninth Circuit authority by arguing that "such cases were incorrectly decided." Motion at 20. Plaintiff's argument has appeal, given the facts of this particular case. However, this Court cannot ignore controlling Ninth Circuit authority that is directly on point. Accordingly, the Court declines to award Plaintiff his attorney's fees in the amount of $70,563 and costs of $10,909.00 as detailed in Exhibit A to the Coleman Declaration. Plaintiff admits that these fees and costs were incurred during the internal administrative appeals process, and under the Ninth Circuit's decision in Cann, supra, they are not recoverable.
Because Plaintiff was successful in this action, and because the Hummell factors weigh in Plaintiff's favor, Plaintiff is entitled to an award of $148,560 in attorney's fees as set forth in Exhibit B of the Coleman Declaration, plus additional fees incurred from January 10, 2010 to February 18, 2011 as set forth in the supplemental Coleman declaration. Coleman Decl., ¶¶ 10-11, Exhs. A (¶. 1-9 of fee statement showing hours billed by timekeeper and fee amounts), B (¶. 1-12, 15 of fee statement showing hours billed by timekeeper and fee amounts); Kim Decl., ¶ 7.
The Ninth Circuit has concluded that a court can award reasonable litigation out-of-pocket expenses (including computer-based legal research costs) that would normally be charged to a fee paying client, as part of "reasonable attorney's fees" under ERISA section 502(g)(2)(D), 29 U.S.C. § 1132(g)(2)(D). Trustees of the Const. Industry and Laborers Health and Welfare Trust v. Redland Ins. Co., 460 F.3d 1253, 1259 (9th Cir.2006). In a recent case from the Northern District, the court awarded Plaintiffs counsel all of its claimed litigation expenses. Coleman Decl., Exh. D; Fontana, 2009 WL 585811 at *1.
Plaintiff seeks an award of litigation expenses in the amount of $19,442.55. Coleman Decl., Exhs. A (¶. 8-9 of fee statement), B (¶. 12-15 of fee statement). Plaintiff has also submitted a supplemental billing statement, which reflects expenses incurred from January 10, 2011 through February 18, 2011. See Docket Nos. 113, 114. For the reasons explained above, the Court declines to recommend that the District Court award $10,909.00 in costs sought by Plaintiff in Exhibit A of the Coleman Declaration. These expenses were incurred during the administrative
Plaintiff argues that $78,706.29 in pre-judgment interest should be included in the fee award in this case. The Court finds that pre-judgment interest is appropriate in this case and that Plaintiff is not procedurally barred from seeking prejudgment interest.
Defendants oppose the request for prejudgment interest, arguing that Plaintiff's request for pre-judgment interest in a post-judgment motion is improper. Relying upon Federal Rule of Civil Procedure 59(e) and Osterneck v. Ernst & Whinney, 489 U.S. 169, 175, 109 S.Ct. 987, 103 L.Ed.2d 146 (1989), Defendants argue that Plaintiff is procedurally barred from seeking pre-judgment interest in a postjudgment motion. The cases cited by Defendants in support of their argument, however, do not aid their cause. Defendants rely upon Osterneck, for the proposition that "prejudgment interest is an element of damages and must be part of the judgment." Opp. at 2. Defendants argue that any request for prejudgment interest must be included as part of a motion pursuant to Rule 59(e), which provides that such motions are to be filed within 28 days of entry of judgment. Because Plaintiff's motion does not cite to Rule 59(e), but cites to ERISA's Section 502, Defendants argue, it cannot properly be considered a motion to amend the judgment under Rule 59(e).
The Court is not persuaded by this argument. The Supreme Court stated: "the Court of Appeals was correct to conclude that a postjudgment motion for discretionary prejudgment interest constitutes a motion to alter or amend the judgment under Rule 59(e)." Osterneck, 489 U.S. 169, 109 S.Ct. 987. Defendants cite no authority for the proposition that a motion to amend a judgment to include prejudgment interest must recite FRCP 59(e) in the caption of the motion, or else it is deemed untimely and procedurally barred. For example, courts routinely construe motions for reconsideration as motions to amend or alter a judgment pursuant to Rule 59(e). See e.g., Hill v. San Francisco Bay Area Rapid Transit Dist., 2006 WL 335411 (N.D.Cal., February 26, 2006) ("Plaintiff does not specify under which rule he seeks reconsideration. Since the motion was filed within ten days of final judgment, this order treats the latter motion as one to alter or amend the judgment under FRCP 59(e).")
Nor do Defendants cite authority for the notion that a motion for pre-judgment interest cannot be coupled with a motion for attorney's fees and litigation expenses. Defendants cite McCalla v. Royal MacCabees Life Ins. Co., 369 F.3d 1128 (9th Cir.2004) in support of their argument that Plaintiff's motion for pre-judgment interest is procedurally barred. In McCalla, the Ninth Circuit found that a motion for prejudgment interest (filed three years after the judgment was entered) was un-timely
Here, Plaintiff filed his motion for attorneys' fees and costs, including the present request for pre-judgment interest on January 11, 2011, which is within the 28-day time period after the December 28, 2010 judgment in which to file a motion to amend under Rule 59(e). Plaintiff points out in his reply brief that his motion was filed within the 28-day period to amend or alter a judgment under Rule 59(e). The Court finds this to be sufficient. Accordingly, the Court recommends that prejudgment interest be awarded to Plaintiff.
The parties also dispute the amount of pre-judgment interest based upon opposing views of proper interest rate to be applied. Plaintiff is correct that a district court has the discretion to award interest at a rate it deems appropriate in the particular case, based on the considerations of fairness and balancing the equities. Blankenship v. Liberty Life Assur. Co. of Boston, 486 F.3d 620, 628 (9th Cir. 2007). Plaintiff argues that in exercising this discretion, some courts have awarded prejudgment interest in the amount of 10% simple interest per annum, as set as set by California Insurance Code § 10111.2 when the circumstances and equities justify the rate. See, e.g. Arnett v. Hartford Life and Acc. Ins. Co., 2006 WL 5781982, *5 fn. 6 (C.D.Cal. Dec. 19, 2006) (adopting the rate of prejudgment interest under Cal. Ins. Code § 10111.2 on the grounds that Hartford denied the claimant the opportunity for a full and fair review of his claim by applying the wrong occupational standard and unreasonably concluding that the claimant could perform the essential duties of his position). Plaintiff urges this Court to do the same.
The Court declines Plaintiffs request to recommend that the District Court award interest at the rate of 10% simple interest per annum, as set by the California Insurance Code § 10111.2. Plaintiff argues that Standard's bad faith and culpability or "the equities of the case" merit the application of a rate of 10%, as set by California Insurance Code § 10111.2. The Court disagrees. Although Plaintiff is correct that courts frequently award interest on past-due benefits in ERISA cases, (see, e.g., Grosz-Salomon v. Paul Revere Life Ins. Co., 237 F.3d 1154, 1163-64 (9th Cir.2001)), the Court must follow Ninth Circuit precedent addressing this issue. The Ninth Circuit has explained that:
Dishman v. UNUM Life Ins. Co. of America, 269 F.3d 974, 988 (9th Cir.2001) (emphasis added) (footnote omitted).
The Court is, however persuaded by Plaintiffs alternative request—that an interest rate of 5% should be applied given
The Court concludes, after considering the factors set forth in Hummell, and based upon Defendants' non-opposition to Plaintiff's entitlement to fees and costs, that Plaintiff should be awarded his attorneys' fees and costs.
Accordingly, it is recommended that the Motion be GRANTED IN PART as follows:
IT IS SO ORDERED.
