Harlick v. Blue Shield of California Group Health Plan

Filing 109

Order by Hon. Samuel Conti granting 104 Motion for Attorney Fees.(sclc1, COURT STAFF) (Filed on 6/3/2013)

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1 2 3 4 5 6 7 IN THE UNITED STATES DISTRICT COURT 8 FOR THE NORTHERN DISTRICT OF CALIFORNIA 9 For the Northern District of California United States District Court 10 JEANENE HARLICK 11 ) ) ) ) ) ) ) ) ) ) Plaintiff, 12 v. 13 BLUE SHIELD OF CALIFORNIA, 14 Defendant. 15 Case No. C 08-3651-SC ORDER GRANTING MOTION FOR ENTRY OF JUDGMENT AND FOR ATTORNEY FEES AND COSTS 16 17 I. INTRODUCTION Now before the Court is Plaintiff Jeanene Harlick's 18 19 ("Harlick") motion for entry of judgment and for attorney fees and 20 costs. 21 ("Blue Shield") has opposed the Motion and Plaintiff has filed a 22 reply in support of the Motion. 23 ("Reply"). 24 appropriate for determination without oral argument. 25 reasons set forth below, Harlick's Motion is GRANTED. 26 /// 27 /// 28 /// ECF No. 104 ("Mot."). Defendant Blue Shield of California ECF Nos. 105 ("Opp'n"), 107 Pursuant to Civil Local Rule 7-1(b), this matter is For the 1 II. BACKGROUND 2 Harlick suffers from anorexia nervosa and, in 2006, was 3 admitted to the Castlewood Treatment Center ("Castlewood"), which 4 specializes in eating disorders. 5 for 191 days. 6 Plan, paid for Harlick's first eleven days at Castlewood, but then 7 refused to pay for the rest of her treatment. 8 9 Harlick remained at Castlewood Blue Shield, the administrator of Harlick's ERISA Harlick filed this action against Blue Shield in October 2008, seeking payment of healthcare benefits. On March 4, 2010, the United States District Court For the Northern District of California 10 Court granted Blue Shield's motion for summary judgment. 11 v. Blue Shield of Cal., CIV 08-3651 SC, 2010 WL 760484 (N.D. Cal. 12 Mar. 4, 2010). 13 residential care to Harlick and found that Harlick's plan 14 unambiguously excluded coverage for such care. 15 found that, while the plan provided coverage for Skilled Nursing 16 Facilities ("SNF"), Castelwood was not an SNF. 17 to reach the issue of whether California's Mental Health Parity Act 18 (the "Parity Act") required coverage of Harlick's treatment at 19 Castlewood. 20 Harlick The Court concluded that Castlewood provided Harlick subsequently appealed. The Court also The Court declined The Ninth Circuit held that 21 the plan did not require coverage for Harlick's residential care, 22 but found that coverage was mandated by the Parity Act, which 23 requires coverage for "medically necessary treatment" of "severe 24 mental illnesses." 25 721 (9th Cir. 2012). 26 to the Supreme Court, and the Supreme Court asked Harlick to file 27 an opposition to that petition. 28 Court denied Blue Shield's cert petition. Harlick v. Blue Shield of Cal., 686 F.3d 699, Blue Shield filed a petition for certiorari On March 4, 2013, the Supreme 2 1 III. DISCUSSION 2 A. 3 Harlick now seeks entry of judgment in the amount of Judgment Amount 4 $218,749.44, which includes prejudgment interest. Harlick's 5 mother, Robin Watson ("Watson"), has filed a declaration setting 6 forth how Harlick arrived at this amount. 7 Decl."). 8 Harlick's treatment. 9 to draw down from a home equity line and twice refinance her home ECF No. 104-12 ("Watson Watson declares that she paid Castlewood $146,290 for Id. ¶ 9. Watson also declares that she had Id. ¶¶ 4-7. Watson United States District Court For the Northern District of California 10 to finance Harlick's care at Castlewood. 11 incurred $61,523 in interest payments. 12 $10,936.44 in points (prepaid interest) and fees in refinancing her 13 home loans. 14 Id. ¶ 9. She also incurred Id. Blue Shield does not object to the entry of judgment in the 15 amount of $146,290, or to the award of prejudgment interest in the 16 amount of $61,523.00. 17 Harlick's attempt to include in the judgment the $10,936.44 that 18 Watson spent on points and fees in connection with the two 19 refinances of her home mortgage. 20 Shield benefitted from Watson's refinancing because the refinancing 21 lowered the prejudgment interest that Blue Shield must now pay. 22 Reply at 1. 23 Opp'n at 3. However, it does oppose Id. Harlick responds that Blue In ERISA cases like this one, district courts have the 24 discretion to award prejudgment interest. Blankenship v. Liberty 25 Life Assur. Co. of Boston, 486 F.3d 620, 627 (9th Cir. 2007). 26 award of prejudgment interest is intended to compensate the 27 plaintiff for losses incurred as a result of an insurer's 28 nonpayment of benefits. The See Dishman v. UNUM Life Ins. Co. of Am., 3 prescribed for post-judgment interest under 28 U.S.C. § 1961 is 3 appropriate for fixing the rate of pre-judgment interest unless the 4 trial judge finds, on substantial evidence, that the equities of 5 that particular case require a different rate." Blankenship, 486 6 F.3d at 628 (quotations and citations omitted). In this case, the 7 rate set by 28 U.S.C. § 1961, the Treasury bill rate, is 8 substantially lower than the interest rate Watson paid. 9 finds that deviating from this rate is an appropriate and equitable 10 United States District Court 269 F.3d 974, 988 (9th Cir. 2001). 2 For the Northern District of California 1 "Generally, the interest rate means of compensating Harlick for the interest payments her mother 11 incurred in funding her treatment. The Court However, the Court declines to compensate Harlick for the 12 13 points and fees associated with Watson's refinancing. 14 true that Blue Shield benefitted from the refinancing, Watson also 15 benefitted. 16 loan, not just that portion she borrowed to pay for Harlick's 17 treatment. 18 the award of prejudgment interest should include the costs a party 19 incurs in securing a more favorable interest rate. The lower interest rate affects Watson's entire home Further, Harlick has cited no authority indicating that For these reasons, the Court finds that judgment in the amount 20 21 While it is of $207,813, inclusive of prejudgment interest, is appropriate. 22 B. Attorney Fees 23 The Court considers whether Harlick is entitled to attorney 24 fees. Concluding that she is, the Court next determines the 25 appropriate lodestar amount and whether that amount should be 26 enhanced by a multiplier. 27 /// 28 /// 4 1 2 i. Attorney fees under 29 U.S.C. § 1132(g) The ERISA statute provides that "the court in its discretion 3 may [award] a reasonable attorney's fee and costs of action to 4 either party" in an action involving delinquent contributions. 5 U.S.C. § 1132(g)(1). 6 only award fees to a party that has achieved "some degree of 7 success on the merits." 8 130 S. Ct. 2149, 2158 (2010). 9 stated that a plan participant who prevails in an action to collect 29 The Supreme Court has held that courts may Hardt v. Reliance Standard Life Ins. Co., Additionally, the Ninth Circuit has United States District Court For the Northern District of California 10 benefits under the plan "should ordinarily recover an attorney's 11 fee unless special circumstances would render such an award 12 unjust." 13 Cir. 1984) (quotations omitted). 14 15 Smith v. CMTA-IAM Pension Trust, 746 F.2d 587, 589 (9th The Ninth Circuit has also set forth a number of factors to consider in determining whether attorney fees are appropriate: 16 17 18 19 20 (1) the degree of the opposing parties' culpability or bad faith; (2) the ability of the opposing parties to satisfy an award of fees; (3) whether an award of fees against the opposing parties would deter others from acting under similar circumstances; (4) whether the parties requesting fees sought to benefit all participants and beneficiaries of an ERISA plan or to resolve a significant legal question regarding ERISA; and (5) the relative merits of the parties' positions. 21 22 Hummell v. S. E. Rykoff & Co., 634 F.2d 446, 453 (9th Cir. 1980). 23 "No one of the Hummell factors . . . is necessarily decisive, and 24 some may not be pertinent in a given case." 25 Admin. Corp. v. Russell, 726 F.2d 1410, 1416 (9th Cir. 1984). 26 Hummell factors are generally construed in favor of protecting 27 participants in employee benefit plans. 28 176 F.3d 1167, 1172 (9th Cir. 1999). 5 Carpenters S. Cal. The McElwaine v. US W., Inc., 1 Blue Shield does not appear to dispute that Harlick achieved 2 at least some degree of success on the merits, but it argues that 3 four of the five Hummell factors do not apply here. 4 addresses the parties' arguments on the Hummell factors below. 5 The Court The Court agrees that the first Hummell factor does not favor 6 the award of attorney fees. 7 culpable because the Ninth Circuit rejected its interpretation of 8 the Parity Act. 9 ultimately premised on an argument that the court raised for the Mot. at 7. Harlick argues that Blue Shield is But the Ninth Circuit's decision was United States District Court For the Northern District of California 10 first time at oral argument -- that all medically necessary 11 treatment for listed conditions must be covered. 12 rejected Harlick's interpretation of the plan and did not adopt her 13 initial theory of the Parity Act. 14 is not dispositive. 15 The Ninth Circuit Nevertheless, this factor alone See Russell, 726 F.2d at 1416. As to the second Hummell factor, Blue Shield does not dispute 16 that it is able to satisfy an award of attorney fees. 17 Circuit has held that, "[b]ased on this factor alone, absent 18 special circumstances, a prevailing ERISA employee plaintiff should 19 ordinarily receive attorney's fees from the defendant." 20 F.2d at 590. 21 generally difficult for an individual plan participant to carry the 22 heavy burden of litigating a denial of benefits. 23 The Ninth Smith, 746 The court reasoned that, absent fee shifting, it is Id. With respect to the third Hummell factor concerning 24 deterrence, Harlick argues that an attorney fee award will send a 25 message to other California health insurers that they must follow 26 California laws and regulations. 27 that it was trying to follow California law in the first instance, 28 but the law on the issue was uncertain. Mot. at 7. 6 Blue Shield responds Opp'n at 8. Blue Shield 1 contends that, following the Ninth Circuit's decision in this case, 2 it is unlikely that any other ERISA plan operating within the Ninth 3 Circuit will attempt to enforce an exclusion for residential care 4 for severe mental illness. 5 is neutral. 6 obviated the need for this litigation, many of the legal issues 7 raised by this case were uncertain prior to the Ninth Circuit's 8 opinion. 9 Id. The Court finds that this factor While a closer reading of the Parity Act may have The fourth Hummell factor favors the award of attorney fees. United States District Court For the Northern District of California 10 While Harlick did not seek to benefit all participants and 11 beneficiaries of an ERISA plan, her lawsuit did resolve a 12 significant question regarding ERISA. 13 the issue of whether the Parity Act prevents ERISA plans from 14 excluding coverage for residential treatment of severe mental 15 disorders. 16 and that "ERISA was merely the vehicle for [Harlick] to bring her 17 complaints about coverage to federal court." 18 argument is unpersuasive, since in this case, state law had a 19 significant impact on the scope of ERISA coverage. 20 Harlick's litigation, persons living with serious mental health 21 conditions in California are now entitled to additional protections 22 under ERISA. 23 Specifically, it resolved Blue Shield argues that this is an issue of state law, Opp'n at 9. This As a result of The fifth Hummell factor -- the relative merits of the 24 parties' positions -- also favors the award of attorney fees. The 25 Ninth Circuit ultimately held for Harlick, concluding that the 26 Parity Act required Blue Shield to provide coverage for Harlick's 27 treatment at Castlewood. 28 rejected Harlick's interpretation of the Plan's language, as well Blue Shield argues that the Ninth Circuit 7 1 as her initial interpretation of the Parity Act. Opp'n at 9-10. 2 But the fact remains that the Ninth Circuit ultimately held that 3 Harlick was entitled to the relief that she requested.1 Since the second, fourth, and fifth Hummell factors favor an 4 5 award of attorney fees, the Court finds that this case does not 6 present the kind of special circumstances that would warrant 7 denying attorney fees. 8 Blue Shield could not have reasonably anticipated that its denial 9 of benefits was wrong. United States District Court For the Northern District of California 10 The crux of Blue Shield's argument is that Opp'n at 11. However, the fact that the Ninth Circuit ultimately held for Harlick suggests otherwise. 11 ii. Fee calculation Harlick seeks attorney fees of $714,271.40, which includes a 12 13 lodestar amount of $476,181 and a lodestar multiplier of 1.5. 14 at 2. 15 amount and whether the application of a lodestar multiplier is 16 appropriate. 17 Mot. The parties dispute the reasonableness of the lodestar a. Lodestar The first dispute concerning the lodestar amount arises out of 18 19 Harlick's request to have all of her fees paid at her counsel's 20 current hourly rates. 21 counsel performed most of their work years ago, when their hourly 22 rates were significantly lower, and asks the court to follow an 23 unpublished opinion by Judge Lew in Dine v. Metropolitan Life 24 Insurance Co, No. CV-05-03773 RSWL (C.D. Cal. Dec. 9, 2011). 25 1 26 27 28 Blue Shield points out that Harlick's Opp'n Blue Shield also argues that a Los Angeles Superior Court rejected the Ninth Circuit's interpretation of the Parity Act. Opp'n at 10 (citing Rea v. Blue Shield of Cal., 2012 WL 2377405 (Cal. Super. Ct. June 13, 2012)). But an appeal is pending in that case. In any event, the Court's analysis is based on the Ninth Circuit's decision on the merits in this case, not a state court's ruling in another action. 8 1 at 12 (citing ECF No. 104-2 ("Kantor Decl.") Ex. C ("Dine")). 2 However, contrary to Blue Shield's argument, Dine does not suggest 3 that Court should apply historical rates here. 4 noted that a district court has the discretion to compensate a 5 prevailing party for a delay in payment of attorney fees in two 6 ways: "(1) by applying the attorneys' current rates to all hours 7 billed during the course of the litigation, or (2) by using the 8 attorneys' historical rates and adding a prime rate enhancement." 9 Dine at 5 (citing In re Wash. Pub. Power Supply Sys. Sec. Litig., Rather, Judge Lew United States District Court For the Northern District of California 10 19 F.3d 1291, 1305 (9th Cir. 1994)). Judge Lew found that using a 11 prime rate enhancement was more appropriate in that case. 12 instant action, Harlick's counsel should be compensated for delay 13 in payment of their fees. 14 ago and have yet to receive any form of remuneration for their 15 services. 16 reason why the Court should apply a prime rate enhancement, the 17 Court finds that Harlick's counsel should be compensated at their 18 current rates. In the They filed the action nearly five years Kantor Decl. ¶ 17. Since Blue Shield has offered no Next, Blue Shield argues that Harlick should not be reimbursed 19 20 for the time spent responding to Blue Shield's motion to dismiss. 21 In that motion, Blue Shield argued that, under Ford v. MCI 22 Communications Corp Health and Welfare Plan, 399 F.3d 1076 (9th 23 Cir. 2005), Harlick had failed to sue a necessary defendant. 24 No. 8. 25 the motion and drafting a response, but never actually filed an 26 opposition. 27 18. 28 Reliance Standard Life Insurance Co., 642 F.2d 1202 (2011). ECF Harlick's counsel spent 17.8 hours ($10,680) researching Instead, Harlick filed an amended complaint. ECF No. As Harlick points out, Ford was later overruled in Cyr v. 9 1 Nevertheless, the Court finds that Harlick's counsel spent an 2 excessive amount of time researching and drafting an opposition 3 brief that was never filed. 4 Harlick's lodestar amount by $5,340. Accordingly, the Court reduces 5 Blue Shield also takes issue with the 39.3 hours ($19,310) 6 Harlick's counsel billed in connection with an attempt to force 7 Blue Shield to respond to written discovery. 8 spent drafting and researching a motion to compel that was 9 withdrawn after Blue Shield filed an amended privilege log. Some of this time was Blue United States District Court For the Northern District of California 10 Shield argues that there was no basis for Harlick's discovery 11 demands, while Harlick contends ERISA allowed for the requested 12 discovery. 13 that were not fully briefed. 14 record, the Court finds that additional meet-and-confer efforts 15 would have obviated the need for Harlick to file a discovery motion 16 that she eventually withdrew. 17 spent about 9.5 hours on this motion at a rate of $500 per hour. 18 Accordingly, the Court reduces Harlick's lodestar by an additional 19 $4,750. 20 The Court is reluctant to adjudicate discovery matters However, based on a review of the It appears that Harlick's counsel The next dispute concerns legal assistance provided by Allison 21 M. Zieve, an attorney at Public Citizen Litigation Group ("Public 22 Citizen"), in connection with Blue Shield's cert petition to the 23 Supreme Court. 24 opposing petitions for cert in order to protect what it perceives 25 to be public interest victories in lower courts. 26 ("Zieve Decl.") ¶ 2. 27 Harlick's counsel to offer assistance opposing Blue Shield's 28 petition. Public Citizen offers pro bono legal assistance by Id. ¶ 3. ECF No. 104-21 In this case, Public Citizen contacted Harlick accepted Public Citizen's offer, and 10 1 Zieve spent 7.6 hours, at a rate of $640 per hour, reviewing and 2 commenting on Harlick's opposition brief. 3 Blue Shield argues that it should not have to pay for Zieve's 4 services because they were offered on a pro bono basis. 5 13. 6 provided pro bono does not render a fee award inappropriate, and 7 withholding a fee award in such circumstances could discourage pro 8 bono representation. 9 (9th Cir. 2010). The Court disagrees. Id. ¶¶ 3, 9, Ex. 1.2 Opp'n at The fact that legal services are See Cuellar v. Joyce, 603 F.3d 1142, 1143 United States District Court For the Northern District of California 10 Blue Shield also argues that Harlick's counsel included 11 excessive charges for minor tasks, including 1.2 hours ($720) for 12 reviewing a two-page form order that the parties previously 13 submitted, 7.9 hours ($4,740) for reviewing 14 page mediation brief, and 1.7 hours ($1,105) for responding to 15 multiple media requests and interviews and for reviewing and 16 revising a press release. 17 these objections as "nitpicks," but does not otherwise respond, 18 except to suggest that the time spent reviewing Blue Shield's 19 mediation brief was necessary because that brief articulated Blue 20 Shield's position on various issues for the first time. 21 6. 22 was excessive and therefore reduces Harlick's lodestar by an 23 additional $4,000. Opp'n at 13-14. Blue Shield's nine- Harlick characterizes Reply at The Court agrees that some of the time spent on these matters For the reasons stated above, the Court reduces Harlick's 24 25 requested lodestar by $14,282, leaving a total lodestar of 26 2 27 28 In her declaration, Zieve asserts that she spent 7.9 hours working on the opposition to the Blue Shield cert petition, but the records attached to her declaration show that she only devoted 7.6 hours to the matter. Accordingly, the Court reduces Zieve's requested lodestar by $192, to $4,864. 11 1 $461,899. 2 3 b. Lodestar multiplier In ERISA cases, "a court may adjust the lodestar upward or initial calculation of the lodestar." 6 Life Co., 214 F.3d 1041, 1045 (9th Cir. 2000). 7 amount is presumptively the reasonable fee amount, and thus a 8 multiplier may be used . . . only in rare and exceptional cases, 9 supported by both specific evidence on the record and detailed 10 United States District Court downward using a 'multiplier' based on factors not subsumed in the 5 For the Northern District of California 4 findings . . . that the lodestar amount is unreasonably low or 11 unreasonably high." 12 the Court to adjust her lodestar upward with a multiplier of 1.5. 13 Mot. at 9-15. 14 Van Gerwen v. Guarantee Mut. Id. (quotations omitted). "The lodestar Here, Harlick asks The quality of an attorney's performance should generally not 15 be used to adjust the lodestar, because considerations concerning 16 quality are reflected in counsel's hourly rate. 17 ex rel. Winn, 130 S. Ct. 1662, 1673 (2010). 18 enhancement may be appropriate where the method used in determining 19 the hourly rate employed in the lodestar calculation does not 20 adequately measure the attorney's true market value, as 21 demonstrated in part during the litigation." 22 enhancement may also be appropriate where "the attorney's 23 performance includes an extraordinary outlay of expenses and the 24 litigation is exceptionally protracted" or "an attorney's 25 performance involves exceptional delay in the payment of fees." 26 Id. at 1674-75. 27 28 Perdue v. Kenny A. However, "an Id. at 1674. An The Court finds that this case does not present the kind of rare or exceptional circumstances that would justify an enhancement 12 1 of attorney fees. 2 it involved difficult and untested issues of insurance coverage, 3 because Blue Shield did not believe that Harlick would succeed, and 4 because the Ninth Circuit's decision was groundbreaking for every 5 insured in California suffering from severe mental illness. 6 at 11-12. 7 not incorporated into the rates charged by Harlick's counsel. 8 Further, Blue Shield's perception of Harlick's likelihood of 9 success is hardly dispositive. United States District Court For the Northern District of California Mot. However, there is no indication that these factors were Accordingly, the Court declines to apply a lodestar multiplier 10 11 Harlick argues that this case is unique because and awards Harlick attorney fees in the amount of $461,899. 12 C. 13 Finally, Harlick seeks non-statutory costs in the amount of Costs 14 $10,663.15. Harlick has provided documentation of her costs, 15 Kantor Decl. ¶ 19, Ex. H, and Blue Shield does not object to the 16 amount requested. 17 and for good cause shown, the Court awards Harlick $10,663.15 in 18 costs. 19 /// 20 /// 21 /// 22 /// 23 /// 24 /// 25 /// 26 /// 27 /// 28 /// Having reviewed the evidence and the arguments 13 1 2 V. CONCLUSION For the foregoing reasons, Plaintiff Jeanene Harlick's motion 3 for entry of judgment and for attorney fees and costs is GRANTED. 4 The Court finds that Harlick is entitled to judgment in the amount 5 of $207,813 and awards Harlick attorney fees in the amount of 6 $461,899 and non-statutory costs in the amount of $10,663.15. 7 Court will enter judgment in a separate Order. 8 9 IT IS SO ORDERED. United States District Court For the Northern District of California 10 11 12 Dated: June 3, 2013 UNITED STATES DISTRICT JUDGE 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 14 The

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