Loan et al v. The Prudential Insurance Company of America
Filing
53
MEMORANDUM OPINION & ORDER: It is ordered that Plas' 46 MOTION for Attorney Fees and 51 AMENDED MOTION for Attorney Fees are GRANTED IN PART and DENIED IN PART. Signed by Judge Joseph M. Hood on 5/10/2011.(SCD)cc: COR
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
LEXINGTON
MIMI LOAN; ASHLEY LOAN; and
AMANDA LOAN,
Plaintiffs,
v.
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA,
Defendant.
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) Civil Action No. 5:08-cv-38-JMH
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) MEMORANDUM OPINION AND ORDER
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Plaintiffs have filed a Proposed Judgment [Record No. 45-1]
and also made a Motion for Prejudgment Interest and Forwarding
Plaintiffs Attorneys’ Fees Under 29 U.S.C. § 1132(g)(1) [Record No.
46], later amended [Record No. 51], to which Defendant has filed
timely Responses [Record Nos. 48 and 52]; and Plaintiffs have also
filed a Reply [Record No. 49].
This matter is now ripe for
decision.
I.
FACTUAL AND PROCEDURAL BACKGROUND
On the night of June 29, 2006, Ernest Loan fell down two
flights of stairs to the basement after drinking three glasses of
wine.
[Record No. 36, p. 2]; Loan v. Prudential Ins. Co. of Am.,
370 F. App’x 592, 593 (6th Cir. 2010).
Mr. Loan went to the
hospital that evening and spent almost a week in intensive care
before
passing
away
as
resulting from his fall.
a
result
of
blunt
force
head
trauma
[Record No. 36, p. 2]; Loan, 370 F. App’x
at 593. A toxicology report showed his plasma alcohol level at 178
mg/dL.
[Record No. 36, p. 2]; Loan, 370 F. App’x at 593.
Loan’s
widow and two children, Plaintiffs Mimi Loan, Ashley Loan and
Amanda Loan, attempted to collect on Mr. Loan’s group accidental
insurance policy issued by Defendant, The Prudential Insurance
Company.
[Record No. 36, p. 2]; Loan, 370 F. App’x at 593.
Defendant, however, denied the claim as Loan’s policy did not
cover deaths resulting from “[b]eing legally intoxicated.” [Record
No. 36, p. 2-3]; Loan, 370 F. App’x at 593.
In both the initial
review and appeal of the initial decision, Defendant “used in-house
doctors
that
were
not
experts
in
toxicology
to
review
the
toxicology report [that showed a plasma alcohol level of 178 mg/dL]
performed on the decedent.”
[Record No. 36, p. 3]; Loan, 370 F.
App’x at 594. Based on this determination, Defendant concluded that
Mr. Loan’s blood alcohol level at the time of his fall was .146
percent or “approximately 1.8 times the typical driving limit in
most states, which is 80 mg/dL or .08 percent.”
[Record No. 36, p.
3]; Loan, 370 F. App’x at 594.
In its order of December 14, 2008, this Court affirmed the
denial of benefits by Defendant to Plaintiffs.
[Record No. 32].
Plaintiffs appealed this Court’s decision four days later to the
Sixth Circuit.
[Record No. 33].
On March 18, 2010, the Sixth
Circuit vacated this Court’s order of December 14, 2008 and
remanded the case back to this Court to again decide whether to
2
affirm the denial of benefits by Defendant. [Record No. 36, p. 13],
Loan, 370 F. App’x at 599.
In doing so, the Sixth Circuit held the
term “legally intoxicated” was ambiguous and that the definition
found in Kentucky’s public intoxication statute applied.
No. 36, p. 5-8]; Loan, 370 F. App’x at 595-96.
[Record
Furthermore, the
Sixth Circuit held that Defendant did not perform a full and fair
review of Plaintiffs’ claim since it employed in-house doctors, as
opposed to outside toxicology experts, to review Plaintiffs’ claim
in determining the extent of Mr. Loan’s intoxication.
36,
p.
8-13];
Loan,
370
F.
App’x
at
596-99.
[Record No.
Upon
remand,
therefore, the Court, in its order of November 30, 2010, granted
Plaintiffs’ Motion for Judgment and ordered Plaintiffs to file a
proposed judgment and motion, which was followed by appropriate
responses and replies by the parties.
[Record No. 44]; see also
[Record No. 45-52].
II. THE COURT SHALL AWARD PLAINTIFFS PREJUDGMENT AND POST-JUDGMENT
INTEREST.
While
Defendant
argues
that
the
awarding
of
prejudgment
interest is within the Court’s discretion and ERISA does not
mandate
the
award,
this
Court
finds
that
there
are
general
equitable principles upon which to base its decision to award
prejudgment interest to Plaintiffs. See Perrin v. Hartford Life
Ins. Co., No. 06-cv-182-JBC, 2008 WL 2705451, at *2 (E.D. Ky. July
7, 2008). The Sixth Circuit has held that “[a]wards of prejudgment
interest pursuant to § 1132(a)(1)(B) . . . are not punitive, but
3
simply compensate a beneficiary for the lost interest value of
money wrongly withheld from him or her.”
Ford v. Uniroyal Pension
Plan, 154 F.3d 613, 618 (6th Cir. 1998); see also 29 U.S.C. §
1132(a)(1)(B)
(“A
civil
action
may
be
brought
.
.
.
by
a
participant or beneficiary . . . to recover benefits due to him
under the terms of his plan.”).
Thus, “a finding of wrongdoing by
the defendant is not a prerequisite to such an award.”
Tiemeyer v.
Cmty. Mut. Ins. Co., 8 F.3d 1094, 1102 (6th Cir. 1993) (quoting
Drennan v. GM Corp., 977 F.2d 246, 253 (6th Cir. 1992)).
Rather,
the Sixth Circuit only requires a showing that the administrator
“incorrectly withheld benefits.” Shelby Cnty. Health Care Corp. v.
Majestic Star Casino, 582 F.3d 355, 376 (6th Cir. 2009).
In this
case, Defendants wrongfully withheld from Plaintiffs the benefit
properly owed them more than four years ago.
See [Record No. 44].
While Defendant argues it did not delay the judicial process, this
is not the standard used to determine whether prejudgment interest
should be awarded.
Applying the proper standard, this Court will
grant Plaintiffs’ motion for prejudgment interest.
Plaintiffs have also made a motion for post-judgment interest
pursuant to 28 U.S.C. § 1961.
[Record No. 49].
Defendant agrees
that any award of post-judgment interest is determined by reference
to statute.
[Record No. 48].
As a result, the Court shall award
post-judgment interest “from the date of the entry of the judgment”
4
to Plaintiffs.
28 U.S.C. § 1961; see S. Elec. Health Fund v.
Kelley, 308 F. Supp. 2d 847, 871 (M.D. Tenn. 2003).
III. THE COURT SHALL AWARD PLAINTIFFS ATTORNEYS’ FEES.
While no presumption to award attorneys’ fees under the ERISA
statute exists, the Court has broad discretion in making such an
award under 29 U.S.C. § 1132(g).
Maurer v. Joy Techs., Inc., 212
f.3d 907, 919 (6th Cir. 2000) (citations omitted).
The Sixth
Circuit has held the following five factors as relevant to this
Court’s determination whether to award fees:
(1) the degree of the opposing party’s
culpability or bad faith; (2) the opposing
party’s ability to satisfy an award of
attorneys’ fees; (3) the deterrent effect of
an award on other persons under similar
circumstances;
(4)
whether
the
party
requesting fees sought to confer a common
benefit on all participants and beneficiaries
of an ERISA plan or resolve significant legal
questions regarding ERISA; and (5) the
relative merits of the parties’ positions.
Sec’y of Dep’t of Labor v. King, 775 F.2d 666, 669 (6th Cir. 1985).
None of these factors are determinative on their own.
Maurer, 212
F.3d at 919. Rather, this Court will consider all of the so-called
“King factors” in determining whether Plaintiffs are entitled to
attorneys’ fees.
A.
Defendant acted with a high degree of culpability in
denying Plaintiffs’ claim.
Defendant’s denial of Plaintiffs’ claim relying on known
ambiguous language and doctors with a conflict of interest show
5
Defendant acted in bad faith. A decision that “was erroneous, even
arbitrary [does not necessarily] evidence a degree of culpability
approaching bad faith.”
(6th Cir. 1996).
the
However, a plan administrator is “culpable where
administrator
opinions
of
department.”
Folitce v. Guardsman, 98 F.3d 933, 937
terminated
doctors
benefits
employed
by
based
the
primarily
company’s
own
on
the
claim
Gaeth v. Hartford Life Ins. Co., 538 F.3d 524, 530
(6th Cir. 2008). Defendant correctly argues that their reliance on
the known ambiguous provision in the insurance policy does not, on
its own, constitute bad faith.1
Combined with Defendant’s failure
to seek outside evaluations, however, Plaintiffs have shown that
Defendant exhibited a high degree of culpability.
Defendant relied on a blood serum test, which Plaintiffs claim
was unreliable. [Record No. 36, p. 8-10]; Loan v. Prudential Ins.
Co. of Am., 370 F. App’x 592, 596-97 (6th Cir. 2010).
In analyzing
this test, Defendant relied solely on an in-house doctor to
evaluate
their
Plaintiffs’
initial
subsequent
denial
of
appeal,
benefits
even
after
to
an
Plaintiffs
in-house
and
doctor
“indicated that it might be worthwhile to consult a toxicology
expert” to review the record.
Id.
The Sixth Circuit recognized
the unreasonableness of Defendant’s review when detailing the
readily apparent conflict of interest an in-house doctor faces when
1
Indeed, this Court agreed with Defendant’s definition of the
term “legal intoxication” in its Order of December 4, 2008.
[Record No. 31].
6
evaluating these claims.
[Record No.
36, p. 11-12], Loan v.
Prudential Ins. Co. of Am., 370 F. App’x 592, 598 (6th Cir. 2010).
Thus, Defendant’s “unreasonable” review, as determined by the Sixth
Circuit, shows a high level of culpability on the part of Defendant
rising to the level of bad faith.
B.
Defendant has
attorneys’ fees.
the
ability
to
satisfy
an
award
of
This factor, while carrying little weight, also militates in
favor
of
granting
Plaintiffs’
motion
for
attorneys’
fees.
Defendant argues “the ability to satisfy an award . . . is not
typically an important factor in the analysis [and] the second
factor is ‘weighed more for exclusionary than for inclusionary
purposes.’”
Fujitsu Ten Corp. of Am. Emp. Benefit Plan – Ind.
Emps. v. Unicare Life & Health Ins. Co., No. 06-11897, 2008 U.S.
Dist. LEXIS 86671, at *19 (E.D. Mich. June 16, 2008) (quoting
Gribble v. Cigna Healthplan of Tenn., Inc., No. 93-6115, 1994 U.S.
App. LEXIS 26805 (6th Cir. Sept. 20, 1994).
This does not mean,
however, that the Court should not consider it.
See Gaeth v.
Hartford Life Ins. Co., 538 F.3d 524, 531 (6th Cir. 2008).
Plaintiffs
argue,
and
Defendant
does
not
dispute,
that
the
Defendant “is able to ‘satisfy an award of attorney’s [sic] fees’
since they are a large, national insurance company.”
46-1, p. 4].
[Record No.
Thus, this factor, though deserving of less weight
than the other factors, militates in favor of granting Plaintiffs’
motion for attorneys’ fees.
7
C.
The award of attorneys’ fees would have a deterrent
effect
on
other
plan
administrators
under
similar
circumstances.
The plan administrator’s errors in reviewing Plaintiffs’
benefits could easily happen again to another person in Plaintiffs’
position, and this factor falls in favor of awarding Plaintiffs
attorneys’ fees. In evaluating this factor, the court must examine
whether the facts “are not so unique that they fail to serve any
deterrence
value
circumstances.”
to
other
insurance
companies
under
similar
Gaeth v. Harford Life Ins. Co., 538 F.3d 524, 531
(6th Cir. 2008) (citation omitted). In doing so, the Sixth Circuit
recognized the imposition of attorneys’ fees would be appropriate
to ensure that “a plan administrator should ensure that the
opinions on which they rely to make their decisions to terminate
are based on a thorough review of the administrative record.”
at 531-32.
Id.
Defendant argues that this factor should not weigh
against Defendant simply made an “honest mistake” and has “more
significance in a case where the defendant is highly culpable than
in a case such as this one.”
Foltice v. Guardsman Prod. Inc., 98
F.3d 933, 937 (6th Cir. 1996).
As previously stated, however,
Defendants have exhibited a high degree of culpability in their
denial of benefits based on their failure to hire an outside
doctor.
See supra Part II.A.
In addition, this is the second time that the uncertainty
surrounding the definition of “legal intoxication” in insurance
8
contracts has arisen in Kentucky insurance law. More than ten years
ago,
the
Kentucky
intoxication”
Supreme
Court
was ambiguous.
held
that
the
term
“legal
Healthwise of Kentucky, Ltd. v.
Anglin, 956 S.W.2d 213 (Ky. 1997).
In doing so, the court adopted
the definition that would provide the most potential for coverage
to the client, namely the statutory definition used to find a
person guilty of alcohol intoxication.
Id.
Thus, not only could
this situation occur again, but indeed, it already has occurred
before making this factor militate in favor of granting attorneys’
fees to Plaintiffs.
D.
Plaintiffs did not seek to resolve significant legal
questions regarding ERISA.
Though this action has resulted in the resolution of the legal
definition of the ambiguous term “legal intoxication” as stated in
Kentucky insurance policies, Plaintiffs cannot argue that this was
their intention from the outset.
make no such averments.
not
argue
that
the
In their complaint, Plaintiffs
[Record No. 1].
Court
should
define
In fact, Plaintiffs do
“legal
intoxication”
according to Kentucky’s public intoxication statute in their first
Motion for Judgment [Record No. 26].
Rather, the argument makes
its first appearance in Plaintiffs Reply [Record No. 30] to
Defendant’s Response to that Motion.
As a result, Plaintiffs did
not seek to resolve a significant legal question regarding ERISA
and this factor weighs against granting Plaintiffs motion for
attorneys’ fees.
9
E.
The relative merits of the parties’ positions favors
Plaintiffs
Plaintiffs’ position in this matter, however, had greater
merit than that of Defendant.
As the Sixth Circuit held, “[t]his
panel unanimously agrees that Prudential abused its discretion on
the
basis
that
the
decedent
was
conducting a full and fair review.”
legally
intoxicated
without
[Record No. 36, p. 12], Loan
v. Prudential Ins. Co. of Am., 370 F. App’x 592, 598 (6th Cir.
2010).
Thus, the case did not turn solely on the definition of
legal intoxication, which is arguably a closer call, but also
Defendant’s failure to seek independent doctors to conduct a full
and fair review of the evidence pertaining to legal intoxication.
[Record No. 36, p. 5-12], Loan v. Prudential Ins. Co. of Am., 370
F. App’x 592, 595-99 (6th Cir. 2010).
While Defendants argue that
their position had merit since it was founded on the reports it
sought from in-house doctors, it is this very process the Sixth
Circuit held was an abuse of discretion.
[Record No. 36, p. 12],
Loan v. Prudential Ins. Co. of Am., 370 F. App’x 592, 598 (6th Cir.
2010). Thus, this factor also leans in favor of granting Plaintiffs
attorneys’ fees and this Court shall grant Plaintiffs’ motion for
attorneys’ fees under 29 U.S.C. § 1132(g).
F.
The Court shall apply the lodestar
calculate reasonable attorneys’ fees.
calculation
to
As a result, Plaintiffs shall receive attorneys’ fees in the
amount of $23,903 payable to Stewart, Roelandt, Graigmyle and Emery
10
PLLC and $3,692.50 payable to Ed W. Tranter pursuant to 29 U.S.C.
§1132(g)(1).
It is well settled that the lodestar approach of
multiplying the number of hours reasonably spent on litigation by
a reasonable hourly rate is the method used to determine reasonable
attorneys’ fees. Bldg. Serv. Local 47 Cleaning Contractors Pension
Plan
v.
Grandview
Raceway,
1995)(citations omitted).
46
F.3d
1392,
1401
(6th
Cir.
These claimed hours, however, must not
be “excessive, redundant and unnecessary [and those hours] should
be excluded by the court in determining an appropriate award.”
Lindberg v. UT Med. Group, Inc., No. 03-2543 B, 2006 U.S. Dist.
LEXIS 1046, at *15-16 (W.D. Tenn. Jan. 6, 2006) (quoting Gierlinger
v. Gleason, 160 F.3d 858, 876 (2d Cir. 1998)).
Plaintiffs carry
the “burden of providing for the court’s perusal a particularized
billing
record
[though]
all
that
is
necessary
is
‘evidence
supporting the hours worked and rates claimed.’” Bldg. Serv. Local
47 Cleaning Contractors Pension Plan v. Grandview Raceway, 46 F.3d
1392, 1402 (6th Cir. 1995) (citations omitted) (holding that
detailed billing invoices, affidavits pertaining to those invoices,
and appropriate motions provided sufficient evidence necessary for
an award of attorneys’ fees).
Defendant does not dispute the reasonableness of the hourly
rate stated in Plaintiffs’ attorneys’ affidavits but, rather,
11
raises three objections to the reasonableness of the amount of
hours spent on the case. [Record No. 48, p. 5].
The Supreme Court has held:
In the private sector, “billing judgment” is
an important component in fee setting. It is
no less important here. Hours that are not
properly billed to one’s client also are not
properly billed to one’s adversary pursuant to
statutory authority.
Hensley v. Eckerhart, 461 U.S. 424, 434 (1983) (citation omitted).
As a result, this Court must look to the “slip listings” and
affidavit
submitted
by
Plaintiffs
to
[unbillable]’ time from ‘billable time.’”
“distinguish
‘raw
Soler v. G & U, Inc.,
658 F. Supp. 1093, 1096 (S.D.N.Y. 1987) (quoting Ramos v. Lamm, 713
F.2d 546, 553 (10th Cir. 1983)).
These listings and affidavits
show that Defendant was right to object.
listings
from
Stewart,
Roelandt,
Regarding the slip
Craigmyle
&
Emery,
PLLC,
Plaintiffs state in their affidavit that attorneys spent 219.95
hours on this litigation.
[Record No. 46-2, p. 1].
However,
Plaintiffs’ submitted total fails to remove 106.45 unbillable
hours, as referenced on their “slip listings.”
As Defendants have
not objected to the rates submitted by Plaintiffs, the Court finds
the following breakdown of the lodestar calculation appropriate:
Name
Total
Hours
Unbillable
Hours
Billable
Hours
Rate
Lodestar
John Frith
Stewart
(lead attorney)
38.10
15.35
22.75
$275
$6,526.25
12
93
27.9
65.1
$200
$13,020.00
14.5
0
14.5
$195
$2,827.50
.6
0
.6
$175
$105.00
Cindy Bauer
(paralegal)
13.5
2.95
10.55
$135
$1,424.25
Blake Nolan
(law clerk)
60.25
60.25
0
$65
0
Total:
219.95
106.45
113.5
x
$23,903
Mary M. McGuire
(attorney)
Matthew P.
Lynch
(attorney)
Sarah P. Harris
(attorney)
Attorney Ed W. Tranter, has also submitted an affidavit with 21.1
hours of recorded time and an hourly fee of $175.00, to which
Defendants have not objected to either the amount of hours or the
fee.
[Record No. 46-4].
This Court, therefore, shall award
attorneys’ fees in the amount of $23,903.00 to Stewart, Roelandt,
Graigmyle and Emery PLLC and $3,692.50 to Ed W. Tranter.
As to
Plaintiffs’ motion for costs, the Court shall deny it without
prejudice as Plaintiffs have failed to submit an itemized bill of
costs.2 See 28 U.S.C. § 1290; LR 54.3 (“The prevailing party must
file a Bill of Costs with the Clerk and serve a copy of the bill on
each adverse party within thirty (30) days of entry of judgment.”)
2
Plaintiffs may submit Form AO 133 - Bill of Costs to fulfill
this requirement.
13
IV.
The Court shall not award enhanced attorney’s fees.
Plaintiffs have also made a motion for an enhancement of
attorneys’ fees from Defendant to cover the entirety of the
contingency fee owed by Plaintiffs to their attorneys. [Record No.
51].
Plaintiffs have submitted to the Court the contingency
contract entered into with attorneys Ed W. Tranter and John Frith
Stewart in which “the client agrees to pay to the Attorney a fee of
40% of the recovery.”
[Record No. 51-2].
The Sixth Circuit has
held, however, that “[t]here is a ‘strong presumption’ that [the]
lodestar figure represents a reasonable fee.” Building Serv. Local
47 Cleaning Contractors Pension Plan v. Grandview Raceway, 46 F.3d
1392, 1401-02 (6th Cir. 1995) (citations omitted).
Where the
attorney obtains excellent results for his client, he is entitled
to a full compensatory fee.
Isabel v. City of Memphis, 404 F.3d
404, 416 (6th Cir. 2005)(citation omitted).
Where the attorney
achieves exceptional success, an enhanced award may be justified.
Hensley v. Eckerhart, 416 U.S. 424, 435 (1983).
Enhanced awards,
however, are “both discretionary and rare, and the applicant bears
the burden of proof of an exceptional result.” Johnanssen v. Dist.
No. 1 - Pac. Coast Dist., 292 F.3d 159, 181
(4th Cir. 2002);
See
also Elliott v. Metro. Life Ins. Co., No. 04-174-DLB, 2007 WL
4192001, at *5 (E.D. Ky. Nov. 13, 2007) (declining to give a fee
award enhancement in an ERISA case solely on the basis that the
Sixth Circuit rendered a published decision on appeal).
14
While Plaintiffs attorneys have achieved an excellent result
for their client meriting a full compensatory fee, the case and
result does not rise to the level necessary for an enhancement of
that fee.
Relevant factors to consider in determining whether an
enhanced fee is appropriate include:
(1) the time and labor required; (2) the
novelty and difficulty of the questions; (3)
the skill requisite to perform the legal
service properly; (4) the preclusion of other
employment by the attorney due to acceptance
of the case; (5) the customary fee; (6)
whether the fee is fixed or contingent; (7)
time limitations imposed by the client or the
circumstances; (8) the amount involved and the
results
obtained;
(9)
the
experience,
reputation, and ability of the attorneys; (10)
the ‘undesirability’ of the case; (11) the
nature
and
length
of
the
professional
relationship with the client; and (12) awards
in similar cases.
Paschal v. Flagstar Bank, 297 F.3d 431, 435 (6th Cir. 2002)
(quoting Blanchard v. Bergeron, 489 U.S. 87, 91 n.5 (1989)).
A
positive result in a case that does not involve traditional
discovery or a jury trial, however, is not exceptional.
2007 WL 4192001 at *5.
Elliott,
Furthermore, an enhancement based on
contingency is not permitted in determining reasonable attorneys’
fees
as
provided
under
statute
since
“an
enhancement
for
contingency would likely duplicate in substantial part factors
already subsumed in the lodestar [calculation]” City of Burlington
v. Dague, 505 U.S. 557, 562-63 (“The risk of loss in a particular
case (and, therefore, the attorney’s contingent risk) is the
15
product of two factors: (1) the legal and factual merits of the
claim, and (2) the difficulty of establishing those merits [which]
is ordinarily reflected in the lodestar – either in the higher
number of hours expended to overcome the difficulty, or in the
higher hourly rate of the attorney skilled and experienced enough
to do so.”).
Plaintiffs’ argument, however, centers on the fact
that they had a contingency fee agreement with their attorneys.
[Record No. 49].
In addition, there was no discovery in the case
nor was it presented before a jury.
Thus, Plaintiffs have not
shown that the result in their case was exceptional and the Court
shall not grant Plaintiffs’ motion for an enhanced attorney’s fees
award.
V.
CONCLUSION
For the reasons set forth above,
IT IS ORDERED that Plaintiffs’ Motion for Attorney Fees
[Record No. 46] and Plaintiffs’ Amended Motion for Attorney Fees
[Record No. 51] are GRANTED IN PART, and DENIED IN PART.
This the 10th day of May, 2011.
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