Lifecare Management Services, LLC v. Zenith American Solutions, Inc. et al
Filing
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ORDER denying ECF No. 133 Motion for Attorneys' Fees. Signed by Judge Robert C. Jones on 6/14/2017. (Copies have been distributed pursuant to the NEF - KR)
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UNITED STATES DISTRICT COURT
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DISTRICT OF NEVADA
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LIFECARE MANAGEMENT SERVICES,
LLC,
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3:15-cv-00307-RCJ-VPC
Plaintiff,
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vs.
ORDER
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ZENITH AMERICAN SOLUTIONS, INC. et
al.,
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Defendants.
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This case involves a health care provider’s claim under the Employee Retirement Income
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Security Act (“ERISA”) that a trust fund and its third-party administrator improperly refused to
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pay benefits under the trust fund’s welfare benefit plan. Now pending before the Court is a
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Motion for Attorneys’ Fees. (Mot. Att’y Fees, ECF No. 133.) For the reasons given herein, the
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Court denies the motion.
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I.
FACTS AND PROCEDURAL BACKGROUND
In October 2011, Jane Doe (“the Patient”) was admitted for non-emergency treatment at
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Tahoe Pacific Hospital, a facility owned and operated by Plaintiff Lifecare Management
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Services, LLC (“Lifecare”). 1 Prior to the Patient’s admission, Lifecare contacted Defendant
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1 Unless otherwise indicated, Tahoe Pacific Hospital and Lifecare will be referred to hereinafter
collectively as “Lifecare.”
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Zenith American Solutions, Inc. (“Zenith”) to confirm the existence of health care coverage for
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the Patient. Zenith was a third-party administrator of the Electrical Workers Health and Welfare
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Trust Fund (“the Plan”), a non-profit employee benefit trust fund governed by ERISA and
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funded by employer contributions under collective bargaining agreements. Zenith confirmed the
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Patient’s coverage, and Lifecare then admitted and treated the Patient. Subsequently, Lifecare
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submitted a claim to Zenith in excess of $700,000, of which Zenith paid roughly $140,000 and
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refused to pay more. With this lawsuit, Lifecare sought the remaining benefits it believed it was
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owed under the Plan.
On April 13, 2017, the Court granted summary judgment against Lifecare and closed the
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case. (Order, ECF No. 131.) The Court held that Lifecare could not pursue an ERISA claim as
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the Patient’s assignee because the Patient herself was not eligible for coverage under the
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unambiguous terms of the Plan. (Id. at 7–10.) Zenith now moves for an award of attorneys’ fees
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under 29 U.S.C. § 1132(g)(1). (Mot. Att’y Fees, ECF No. 133.)
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II.
LEGAL STANDARDS
Under 29 U.S.C. § 1132(g), a court in its discretion may award reasonable attorneys’ fees
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and costs to either party in an ERISA action brought by a plan participant, beneficiary, or
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fiduciary. The Ninth Circuit has held that in exercising this discretion, district courts should
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consider the following factors:
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(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.
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Hummell v. S.E. Rykoff & Co., 634 F.2d 446, 453 (9th Cir. 1980). “No one of the Hummell
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factors . . . is necessarily decisive, and some may not be pertinent in a given case.” Carpenters
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Southern California Administrative Corp. v. Russell, 726 F.2d 1410, 1416 (9th Cir. 1984).
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Notably, the Ninth Circuit has observed that the Hummell factors “very frequently suggest that
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attorney’s fees should not be charged against ERISA plaintiffs.” Tingey v. Pixley–Richards West,
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Inc., 958 F.2d 908, 909 (9th Cir. 1992).
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III.
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ANALYSIS
Under clear Ninth Circuit precedent, attorneys’ fees are not available here. See Corder v.
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Howard Johnson & Co., 53 F.3d 225, 230–31 (9th Cir. 1994) (discussing Credit Managers Ass’n
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of Southern California v. Kennesaw Life and Accident Insurance, 25 F.3d 743 (9th Cir. 1994)).
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In Corder, the Ninth Circuit analyzed the import of its prior ruling in Credit Managers. That
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analysis need not be fully reproduced here. In brief, the Ninth Circuit affirmed an award of
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attorneys’ fees in Credit Managers, even though the plaintiff was in fact not an ERISA fiduciary,
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because the plaintiff “colorably maintain[ed] for a long time, without any evidentiary basis, ‘that
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it was a fiduciary of an ERISA plan throughout the proceedings below, in a manner sufficient to
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withstand summary judgment . . . .’” Id. at 230 (quoting Credit Managers, 25 F.3d at 747). The
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court concluded its analysis of Credit Managers by stating: “Thus, when a party survives
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summary judgment and actually tries its case on the colorable theory that it is one of the
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enumerated parties specified in § 1132(g)(1), it may be subjected to an award of fees when it
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fails to prevail on that ground because its claim lacks any evidentiary basis.” Id. at 230–31.
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In Corder, therefore, the Ninth Circuit found the district court lacked authority to award
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attorneys’ fees against the ERISA plan under § 1132(g)(1). Id. at 231. In so holding, the court
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stated: “Most important, the Plan’s possible status as a fiduciary did not survive summary
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judgment, as Credit Managers requires; the Plan’s lack of status as a party enumerated in
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§ 1132(g)(1) was, as we have said, the sole ground of the summary judgment against it on the
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ERISA claim.” Id. (emphasis added).
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This case is very closely analogous to Corder. Here, Lifecare asserted it was the rightful
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assignee of the Patient’s rights under the Plan, and asserted the Patient was eligible for Plan
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coverage. However, these assertions did not survive summary judgment. As in Corder, the sole
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basis for the summary judgment in this case was that the Patient—and by extension Lifecare—
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was not a Plan beneficiary or participant. Corder establishes that before attorneys’ fees may be
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awarded against a plaintiff in an ERISA action, the plaintiff must at least survive summary
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judgment on the possibility that it is an enumerated party under § 1132(g). Accordingly, the
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Court lacks authority to award attorneys’ fees here.
Furthermore, the Court briefly notes its satisfaction that the Hummell factors also weigh
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against awarding attorneys’ fees in this case. At bottom, this dispute arose in large part due to
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multiple errors committed by Zenith and the Plan. If Zenith had done its due diligence in
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determining whether the Patient was initially eligible for coverage, it would never have enrolled
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her in the Plan back in 2003. Thereafter, Zenith confirmed and reconfirmed, on several
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occasions, that the Patient was covered. Zenith then went so far as to pay nearly $140,000 in Plan
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benefits based on its incorrect yet persistent belief that the Patient was Plan-eligible. It was not
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until summary judgment, more than a year after this case was filed, that Zenith finally asserted
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the Patient was ineligible under the plain terms of the Plan. Under these circumstances, the Court
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cannot conclude that Lifecare was culpable in bringing this action, or that an award of attorneys’
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fees would serve the deterrent purposes of § 1132(g). See Resilient Floor Covering Pension
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Trust Fund Bd. of Trustees v. Michael’s Floor Covering, Inc., No. 11-cv-05200-JSC, 2017 WL
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24747, at *2 (N.D. Cal. Jan. 3, 2017) (where a plaintiff has a “non-frivolous basis” for asserting
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ERISA claims, there is “little to no deterrent effect to awarding fees”).
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CONCLUSION
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IT IS HEREBY ORDERED that the Motion for Attorneys’ Fees (ECF No. 133) is
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DENIED.
IT IS SO ORDERED. June 14, 2017
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_____________________________________
ROBERT C. JONES
United States District Judge
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