Lifecare Management Services, LLC v. Zenith American Solutions, Inc. et al

Filing 148

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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1 2 3 UNITED STATES DISTRICT COURT 4 DISTRICT OF NEVADA 5 6 7 LIFECARE MANAGEMENT SERVICES, LLC, 8 3:15-cv-00307-RCJ-VPC Plaintiff, 9 vs. ORDER 10 11 ZENITH AMERICAN SOLUTIONS, INC. et al., 12 Defendants. 13 14 This case involves a health care provider’s claim under the Employee Retirement Income 15 Security Act (“ERISA”) that a trust fund and its third-party administrator improperly refused to 16 pay benefits under the trust fund’s welfare benefit plan. Now pending before the Court is a 17 Motion for Attorneys’ Fees. (Mot. Att’y Fees, ECF No. 133.) For the reasons given herein, the 18 Court denies the motion. 19 20 I. FACTS AND PROCEDURAL BACKGROUND In October 2011, Jane Doe (“the Patient”) was admitted for non-emergency treatment at 21 Tahoe Pacific Hospital, a facility owned and operated by Plaintiff Lifecare Management 22 Services, LLC (“Lifecare”). 1 Prior to the Patient’s admission, Lifecare contacted Defendant 23 24 1 Unless otherwise indicated, Tahoe Pacific Hospital and Lifecare will be referred to hereinafter collectively as “Lifecare.” 1 of 5 1 Zenith American Solutions, Inc. (“Zenith”) to confirm the existence of health care coverage for 2 the Patient. Zenith was a third-party administrator of the Electrical Workers Health and Welfare 3 Trust Fund (“the Plan”), a non-profit employee benefit trust fund governed by ERISA and 4 funded by employer contributions under collective bargaining agreements. Zenith confirmed the 5 Patient’s coverage, and Lifecare then admitted and treated the Patient. Subsequently, Lifecare 6 submitted a claim to Zenith in excess of $700,000, of which Zenith paid roughly $140,000 and 7 refused to pay more. With this lawsuit, Lifecare sought the remaining benefits it believed it was 8 owed under the Plan. On April 13, 2017, the Court granted summary judgment against Lifecare and closed the 9 10 case. (Order, ECF No. 131.) The Court held that Lifecare could not pursue an ERISA claim as 11 the Patient’s assignee because the Patient herself was not eligible for coverage under the 12 unambiguous terms of the Plan. (Id. at 7–10.) Zenith now moves for an award of attorneys’ fees 13 under 29 U.S.C. § 1132(g)(1). (Mot. Att’y Fees, ECF No. 133.) 14 15 II. LEGAL STANDARDS Under 29 U.S.C. § 1132(g), a court in its discretion may award reasonable attorneys’ fees 16 and costs to either party in an ERISA action brought by a plan participant, beneficiary, or 17 fiduciary. The Ninth Circuit has held that in exercising this discretion, district courts should 18 consider the following factors: 19 20 21 22 (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. 23 Hummell v. S.E. Rykoff & Co., 634 F.2d 446, 453 (9th Cir. 1980). “No one of the Hummell 24 factors . . . is necessarily decisive, and some may not be pertinent in a given case.” Carpenters 2 of 5 1 Southern California Administrative Corp. v. Russell, 726 F.2d 1410, 1416 (9th Cir. 1984). 2 Notably, the Ninth Circuit has observed that the Hummell factors “very frequently suggest that 3 attorney’s fees should not be charged against ERISA plaintiffs.” Tingey v. Pixley–Richards West, 4 Inc., 958 F.2d 908, 909 (9th Cir. 1992). 5 III. 6 ANALYSIS Under clear Ninth Circuit precedent, attorneys’ fees are not available here. See Corder v. 7 Howard Johnson & Co., 53 F.3d 225, 230–31 (9th Cir. 1994) (discussing Credit Managers Ass’n 8 of Southern California v. Kennesaw Life and Accident Insurance, 25 F.3d 743 (9th Cir. 1994)). 9 In Corder, the Ninth Circuit analyzed the import of its prior ruling in Credit Managers. That 10 analysis need not be fully reproduced here. In brief, the Ninth Circuit affirmed an award of 11 attorneys’ fees in Credit Managers, even though the plaintiff was in fact not an ERISA fiduciary, 12 because the plaintiff “colorably maintain[ed] for a long time, without any evidentiary basis, ‘that 13 it was a fiduciary of an ERISA plan throughout the proceedings below, in a manner sufficient to 14 withstand summary judgment . . . .’” Id. at 230 (quoting Credit Managers, 25 F.3d at 747). The 15 court concluded its analysis of Credit Managers by stating: “Thus, when a party survives 16 summary judgment and actually tries its case on the colorable theory that it is one of the 17 enumerated parties specified in § 1132(g)(1), it may be subjected to an award of fees when it 18 fails to prevail on that ground because its claim lacks any evidentiary basis.” Id. at 230–31. 19 In Corder, therefore, the Ninth Circuit found the district court lacked authority to award 20 attorneys’ fees against the ERISA plan under § 1132(g)(1). Id. at 231. In so holding, the court 21 stated: “Most important, the Plan’s possible status as a fiduciary did not survive summary 22 judgment, as Credit Managers requires; the Plan’s lack of status as a party enumerated in 23 § 1132(g)(1) was, as we have said, the sole ground of the summary judgment against it on the 24 ERISA claim.” Id. (emphasis added). 3 of 5 This case is very closely analogous to Corder. Here, Lifecare asserted it was the rightful 1 2 assignee of the Patient’s rights under the Plan, and asserted the Patient was eligible for Plan 3 coverage. However, these assertions did not survive summary judgment. As in Corder, the sole 4 basis for the summary judgment in this case was that the Patient—and by extension Lifecare— 5 was not a Plan beneficiary or participant. Corder establishes that before attorneys’ fees may be 6 awarded against a plaintiff in an ERISA action, the plaintiff must at least survive summary 7 judgment on the possibility that it is an enumerated party under § 1132(g). Accordingly, the 8 Court lacks authority to award attorneys’ fees here. Furthermore, the Court briefly notes its satisfaction that the Hummell factors also weigh 9 10 against awarding attorneys’ fees in this case. At bottom, this dispute arose in large part due to 11 multiple errors committed by Zenith and the Plan. If Zenith had done its due diligence in 12 determining whether the Patient was initially eligible for coverage, it would never have enrolled 13 her in the Plan back in 2003. Thereafter, Zenith confirmed and reconfirmed, on several 14 occasions, that the Patient was covered. Zenith then went so far as to pay nearly $140,000 in Plan 15 benefits based on its incorrect yet persistent belief that the Patient was Plan-eligible. It was not 16 until summary judgment, more than a year after this case was filed, that Zenith finally asserted 17 the Patient was ineligible under the plain terms of the Plan. Under these circumstances, the Court 18 cannot conclude that Lifecare was culpable in bringing this action, or that an award of attorneys’ 19 fees would serve the deterrent purposes of § 1132(g). See Resilient Floor Covering Pension 20 Trust Fund Bd. of Trustees v. Michael’s Floor Covering, Inc., No. 11-cv-05200-JSC, 2017 WL 21 24747, at *2 (N.D. Cal. Jan. 3, 2017) (where a plaintiff has a “non-frivolous basis” for asserting 22 ERISA claims, there is “little to no deterrent effect to awarding fees”). 23 /// 24 /// 4 of 5 1 CONCLUSION 2 IT IS HEREBY ORDERED that the Motion for Attorneys’ Fees (ECF No. 133) is 3 4 DENIED. IT IS SO ORDERED. June 14, 2017 5 6 7 8 _____________________________________ ROBERT C. JONES United States District Judge 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 5 of 5

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