McCandless v. Countrywide Financial, Incorporated et al

Filing 176

OPINION AND ORDER DENYING PLAINTIFFS 169 MOTION TO ASSESS ATTORNEY FEES AND TAX COSTS, DENYING PLAINTIFFS 172 MOTION FOR SUMMARY JUDGMENT, AND DISMISSING THE ACTION. Signed by District Judge Marianne O. Battani. (KDoa)

UNTIED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

SANDRA MCCANDLESS,
Plaintiff,
CASE NO. 2:08-cv-14195
v.
HON. MARIANNE O. BATTANI
STANDARD INSURANCE COMPANY,
Defendant.
_______________________ __________/

OPINION AND ORDER DENYING PLAINTIFF’S MOTION TO ASSESS
ATTORNEY FEES AND TAX COSTS, DENYING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT, AND DISMISSING THE ACTION
I.

INTRODUCTION

This matter is before the Court on Plaintiff Sandra McCandless’ Motion to Assess
Attorney Fees and Tax Costs relating to her ERISA claim. (Doc. 169.) She argues that
having been awarded remand three times classifies as some success on the merits,
thereby authorizing collection of attorney fees pursuant to 29 U.S.C. § 1132(g)(1).
Accordingly, Plaintiff’s counsel requests the award of $139,170.00 in attorney fees and
$850 in taxable costs. Defendant maintains that the Court has already decided the
matter of attorney fees for a portion of the period covered; that Plaintiff fails to meet the
criteria necessary for an award of fees; and that Plaintiff’s counsel’s fees and hours are
inflated. (Doc. 173.) Additionally, Plaintiff has filed a motion for summary judgment,
arguing that Defendant’s recent award of benefits constitutes a concession of liability.
(Doc. 172.) For the reasons that follow, the Court DENIES both of Plaintiff’s motions
and DISMISSES the present action.
II.

FACTUAL BACKGROUND

Due to the complex history of the present claim, a timeline is included at the
conclusion of the factual background section. Plaintiff Sandra McCandless worked for
Countrywide Home Loans as a manager. Countrywide provided a Group Long Term
Disability Insurance Policy (“the Policy”) for its employees pursuant to Employee
Retirement Income Security Act (“ERISA”). Defendant administered the Policy, both
determining eligibility for benefits and paying benefits. In February 2005, Plaintiff went
on medical leave for major depression. In April 2005, Plaintiff applied for and received
disability benefits for the period covering February 2, 2005, to July 31, 2007, the
maximum time period allowed under the Policy for mental health claims.
Defendant notified Plaintiff in January 2006 that her long-term disability (“LTD”)
benefits for her mental disorder would expire on July 31, 2007, and encouraged her to
submit a claim for disability by a physical condition. In response, Plaintiff requested that
Defendant consider a LTD claim based on her ankylosing spondylitis (“AS”), an
inflammatory disease that causes back pain, progressive stiffness of the spine, arthritis,
and fusing of certain joints. Plaintiff submitted supporting records from her treating
physician, as well as MRI and x-ray reports. After multiple reviews of the medical
documentation, including reviews by a neurologist and a rheumatologist, Defendant
denied Plaintiff continuation of LTD benefits on March 7, 2008. (AR 00126.) In the
denial letter, Defendant emphasized that Plaintiff’s failure to see a rheumatologist
significantly contributed to her failure to satisfy the Policy’s “Care of a Physician”
provision, which mandates that claimants receive care from a medical specialist. (Id.)
After exhausting her administrative remedies, Plaintiff filed the present suit on
September 30, 2008. After a protracted discovery period and attempted settlement, the

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parties filed cross-motions for judgment on the administrative record in June 2010. On
February 15, 2011, this Court granted Defendant’s motion, affirming the denial of LTD
benefits. Plaintiff appealed to the Sixth Circuit, which reversed and remanded the
matter on December 20, 2012, in order for Defendant to have Plaintiff evaluated by a
rheumatologist. The Sixth Circuit found that Defendant “never told McCandless that she
would be ineligible for benefits if she did not see a rheumatologist.” McCandless v.
Standard Ins. Co., 509 F. App’x 443, 448 (6th Cir. 2012). In addition, Defendant “did
not exercise its authority under the Policy to have a rheumatologist conduct an
independent medical evaluation of McCandless.” Id. Thus, the decision was arbitrary
and capricious because although Defendant knew Plaintiff suffered from AS, it failed to
base its decision on an IME from a rheumatologist. Id. Finally, the Sixth Circuit
instructed that the case be remanded to “the plan administrator for a full and fair review
of Plaintiff’s claim, which presumably will include a rheumatology evaluation.” Id. at
449. Accordingly, this Court remanded the case to the plan administrator for the first
time on February 22, 2013. (Doc. 127.)
On March 25, 2013, Plaintiff requested an appointment with a rheumatologist at
University of Michigan Health System, but the earliest available appointment was not
until August of that year. (Doc. 144, p. 14, n.3.) Given the need for an expedited
examination, Plaintiff self-referred to rheumatologist Bernard Rubin, D.O., and
scheduled an appointment for July. (Id.) On April 10, 2013, Plaintiff was evaluated by
Lewis Rosenbaum, M.D., a rheumatologist hired on behalf of Defendant. (AR 00993.)
Defendant received the IME report on May 9, 2013. Plaintiff’s counsel avers that
sometime after Dr. Rosenbaum’s examination, he demanded that Defendant produce

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the report, a request that Defendant reportedly ignored. On June 10, 2013, Defendant
issued a second decision denying benefits, along with a copy of the IME report. (AR
00955.) Shortly thereafter, on July 16, 2013, Plaintiff consulted with Dr. Rubin, as well
as other medical specialists such as a pulmonologist and cardiologist. (See AR
0001438-66.) She then filed a motion on September 13, 2013, to open the
administrative record in order to submit this evidence in rebuttal of Dr. Rosenbaum’s
IME. (Doc. 144.) The Court granted this motion on October 28, 2013, and remanded
the case for a second time for further consideration by the plan administrator. (Doc.
148.)
On March 3, 2014, after receiving 75 pages of new evidence from Plaintiff,
Defendant issued a third denial, stating that these records largely post-dated the
expiration of Plaintiff’s benefits on July 31, 2007. (AR 0001389.) In May 2014, the
parties again filed cross-motions for judgment on the administrative record, seeking
review of this latest denial of benefits. On September 19, 2014, the Court entered an
amended order remanding the claim for a third time. (Doc. 168.) This opinion found
that Defendant’s review of the newly-submitted medical evidence was cursory, as the
denial letter provided no rationale resolving inconsistencies between Dr. Rubin’s and Dr.
Rosenbaum’s findings or explaining why it found one report more credible than the
other. (Id.) Nor did Defendant submit this new evidence for review by another medical
expert. (Id.)
Since this most recent remand, Defendant submitted the administrative record for
review by rheumatologist Joji Kappes, M.D., who opined that Plaintiff’s AS symptoms
likely limited her ability to perform full-time sedentary work as of July 31, 2007. Based

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on Dr. Kappes’ opinion, Defendant has approved Plaintiff’s claim for long term disability
benefits retroactive to the closure of Plaintiff’s claim on July 31, 2007, and will issue
payment in the approximate amount of $655,000.00. Accordingly, Plaintiff moves the
Court to enter summary judgment in her favor and has submitted a proposed order
directing Defendant to pay Plaintiff accrued benefits as well as to provide details
regarding calculation of these accrued benefits. (Doc. 172.) Further, Plaintiff seeks the
assessment of attorney fees and costs. (Doc. 169.)
Date
February 2005
April 2005

March 7, 2008
September 30, 2008
February 15, 2011
December 20, 2012
January 3, 2013
February 22, 2013

March 25, 2013
April 10, 2013
April 20, 2013
May 9, 2013
June 10, 2013
July 16, 2013
Date (Cont’d)
September 13, 2013
October 28, 2013

Event
Plaintiff goes on medical leave for depression.
Plaintiff applies for and receives disability
benefits, covering period February 2, 2005,
through July 31, 2007.
Defendant issues first denial of Plaintiff’s
application for LTD benefits based on AS.
Plaintiff files complaint.
District Court awards judgment on the
administrative record in favor of Defendant.
Sixth Circuit reverses District Court’s decision
dated February 15, 2011.
Plaintiff’s counsel files motion for attorney fees
and costs.
District Court denies Plaintiff’s motion for
attorney fees and costs.
District Court remands case to the plan
administrator for the first time.
Plaintiff requests rheumatology appointment at
University of Michigan Health System.
IME examination performed by Dr. Rosenbaum.
Dr. Rosenbaum writes IME report.
Defendant receives IME report.
Defendant issues second denial of benefits.
Plaintiff consults with rheumatologist Dr. Rubin.
Event (Cont’d)
Plaintiff files motion to supplement the
administrative record.
District Court grants Plaintiff’s motion to
supplement and remands case to plan
administrator for the second time.
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March 3, 2014
September 19, 2014
December 19, 2014

III.

Defendant issues third denial of benefits.
District Court remands case to the plan
administrator for a third time.
District Court informed that Defendant has
approved Plaintiff for LTD benefits, retroactive to
application.

Discussion

The Sixth Circuit “recognizes no presumption as to whether attorney fees will be
awarded” to a prevailing party in an ERISA action. Foltice v. Guardsman Prods., 98
F.3d 933, 936 (6th Cir. 1996). Rather, 29 U.S.C. § 1132(g)(1) authorizes courts to
award reasonable attorney fees and costs to either party at its discretion. A party need
not be a prevailing party to receive an award of attorney fees – instead, a party seeking
fees must show “some degree of success on the merits.” Hardt v. Reliance Standard
Life Ins., 560 U.S. 242, 255 (2010). Hardt provides the following guidance:
A claimant does not satisfy that requirement by achieving “trivial success
on the merits” or a “purely procedural victor[y],” but does satisfy it if the
court can fairly call the outcome of the litigation some success on the
particular party's success was “substantial” or occurred on a “central
issue.”
Id. (quoting Ruckelshaus v. Sierra Club, 463 U.S. 680, 688 n.9 (1983). Moreover, when
exercising the discretion vested in district courts by 29 U.S.C. § 1132(g)(1), the Sixth
Circuit has instructed that courts must consider the following five King factors:
(1) [T]he degree of the opposing party's culpability or bad faith; (2) the
opposing party's ability to satisfy an award of attorney's 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. of Dept. of Labor v. King, 775 F.2d 666, 669 (6th Cir. 1985).

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Plaintiff has previously filed a motion for attorney fees and costs incurred during
the period extending from the filing of the claim on September 30, 2008, through
January 2, 2013, after the Sixth Circuit directed the case be remanded. (Doc. 119, Ex.
3.) The Court heard oral argument on this matter and on February 22, 2013, issued an
order denying the motion for the reasons stated on the record. (Doc. 126.) Plaintiff has
not requested reconsideration of this decision either within the fourteen-day deadline set
forth by Local Rule 7.1(h)(1) or since the expiration of that deadline. Furthermore,
Plaintiff has not argued that there existed a palpable defect in the Court’s order or that
correcting such defect would result in a different disposition. See L.R. 7.1(h)(3). For
these reasons, the Court denies attorney fees for the period covering the inception of
the case through January 2, 2013.
Turning to the matter of attorney fees incurred since January 2, 2013, the Court
may assume without deciding that the subsequent remands classify as some success
on the merits, as Defendant does not contest this point. Firstly, there is no evidence
whatsoever of culpability or bad faith on the part of Defendant. Plaintiff makes much of
the fact that Defendant allegedly withheld Dr. Rosenbaum’s IME report until after it had
issued its second decision denying benefits, which necessitated an additional remand
for consideration of evidence rebutting Dr. Rosenbaum’s report. Defendant received
the IME report on May 9, 2013, and issued its decision to Plaintiff, along with a copy of
the IME report, approximately one month later on June 10. A four-week delay in
providing the report is not suggestive of bad faith. Further, although Plaintiff
presumably had an appointment scheduled with Dr. Rubin prior to receiving notification
of this denial, her counsel never informed Defendant that additional evidence might be

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forthcoming. Therefore, Defendant was not on notice that it should delay issuing a
decision. As such, there is nothing in the record implicating bad faith or anything
beyond mere poor communication between the parties.
Next, Plaintiff argues that Defendant’s failure adequately to address the new
evidence submitted by Plaintiff, in addition to other procedural irregularities, is indicative
of bad faith. To the contrary, case law demonstrates that “[a]n arbitrary and capricious
denial of benefits does not necessarily indicate culpability or bad faith.” Heffernan v.
Unum Life Ins. Co. of Am., 101 F. App’x 99, 109 (6th Cir. 2004); see also Geiger v.
Pfizer, Inc., 549 F. App’x 335, 338-39 (6th Cir. 2013) (upholding denial of fees despite
finding a denial of benefits arbitrary and capricious) (collecting cases). Here, the first
King factor weighs against an award of attorney fees, as there is no evidence beyond
an arbitrary and capricious denial suggesting a high degree of culpability on the part of
Defendant.
Defendant is correct in asserting that the second King factor – ability to pay an
award of fees – is considered “more for exclusionary than for inclusionary purposes”
and should be given little weight. See Warner v. DSM Pharma Chems. N. Am., Inc.,
452 F. App’x 677, 682 (6th Cir. 2011). Although Defendant is certainly able to pay
attorney fees, this factor has no impact on the Court’s ultimate determination.
An award of attorney fees is likely to have the greatest deterrent effect where a
defendant is “highly culpable” or where “deliberate misconduct is in the offing.” Geiger,
549 F. App’x at 339 (quoting Foltice, 98 F.3d at 937). In the present case, there would
be no such deterrent effect because, as discussed above, there is no evidence of bad
faith or culpability on the part of Defendant.

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A plaintiff who seeks LTD benefits only for herself does not seek to confer a
common benefit on all participants in an ERISA plan. See Gaeth v. Hartford Life Ins.,
538 F.3d 524, 533 (6th Cir. 1999). The relief sought in the present action would confer
LTD benefits only upon Plaintiff; her success in the litigation did not result in
redeterminations by the plan administrator of other similarly adverse benefits decisions.
See id. In Gaeth, the court rejected the plaintiff’s contention that a common benefit
would result from the deterrence of arbitrary and capricious reviews. See id. Plaintiff
argues that her challenge of the ubiquitous “Care of a Physician” language in the policy
would have resolved a significant legal question regarding ERISA, resulting in
heightened judicial review for other claimants. However, neither this Court nor the Sixth
Circuit ever engaged in contractual interpretation of this policy language, instead
remanding the case because of Defendant’s arbitrary and capricious reasoning and
application of this provision. These decisions are tailored to the particulars of Plaintiff’s
claim and have no impact on other ERISA claimants. Moreover, it is dubious that
Plaintiff set out with the intention of challenging the terms of the policy, as the complaint
makes no reference to the “Care of a Physician” provision or any general challenges to
the terms of the policy. (See Doc. 1.)
Lastly, it cannot be said that Defendant’s position throughout the litigation has
lacked merit. A court’s decision that an insurer’s denial of LTD benefits was arbitrary
and capricious does not signify that the insurer’s position was meritless or frivolous.
See O’Callaghan v. SPX Corp., 442 F. App’x 180, 186 (6th Cir. 2011) (upholding district
court’s denial of attorney fees where, although the defendant’s position was not
persuasive enough to avert a finding of an arbitrary and capricious denial of benefits,

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the defendant’s position was not frivolous). Indeed, in its last opinion, the Court
specifically noted, “[T]he evidence is not so one-sided as to entitle McCandless
undoubtedly to benefits.” Defendant is correct in arguing that some of the conflicting
medical evidence in the record lends support to its position. Plaintiff has therefore failed
to demonstrate that she is entitled to attorney fees in accordance with the King factors.
Additionally the Court denies Plaintiff’s motion for summary judgment for the reasons
stated on the record at the hearing held on January 7, 2015.
IV.

Conclusion

For the foregoing reasons, the Court DENIES Plaintiff’s motion for attorney fees and
taxable costs and DENIES Plaintiff’s motion for summary judgment. Further, the Court
DISMISSES this action, as there are no further issues presented.
IT IS SO ORDERED.

Date:

February 27, 2015

s/Marianne O. Battani
MARIANNE O. BATTANI
United States District Judge

CERTIFICATE OF SERVICE
The undersigned certifies that the foregoing Order was served upon counsel of record via the Court's ECF System to
their respective email addresses or First Class U.S. mail to the non-ECF participants on February 27, 2015.
s/ Kay Doaks
Case Manager

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