Pfenning v. Farmers Group, Inc. Employee Prepaid Benefit Plan et al
DECISION AND ORDER GRANTING PLAINTIFF'S MOTION FOR ATTORNEY'S FEES AND COSTS. DOC. 33 . Plaintiff is ORDERED within 20 days to submit to the Court a proposed judgment order awarding fees and costs in the amount of $121,267.00 and prej udgment interest at a rate of 3% for 2014; 3% for 2015; 3% for 2016; and 4% for 2017, and simultaneously to inform the Court, pursuant to Local Rule 7.3, whether there will be an objection contesting the calculations or form of the proposed order. Any objection will be due within 20 days of filing of the proposed order. Signed by Judge Thomas M. Rose on 10/19/17. (ep)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION AT DAYTON
LIBERTY LIFE ASSURANCE COMPANY,
Case No. 3:14-cv-471
District Judge Thomas M. Rose
DECISION AND ORDER GRANTING PLAINTIFF’S MOTION
FOR ATTORNEY’S FEES AND COSTS. DOC. 33.
This matter is before the Court on Plaintiff Douglas Pfenning’s Motion for an Award of
Attorney’s Fees and Costs. Doc. 33.
On December 31, 2014, Plaintiff Douglas Pfenning filed his complaint under
§502(a)(1)(B) of the Employee Retirement Income Security Act of 1972, 29 U.S.C. §
1132(a)(1)(B), accusing Defendant Liberty Life Assurance Company of Boston of violating his
rights to disability benefits and demanding that Liberty account for past benefits and pay future
benefits. Plaintiff argued that he was entitled to de novo review pursuant to the Plan’s choice of
law provision which identified California law as governing the Plan. Defendants initially argued
that an arbitrary and capricious standard of review should be used. On December 28, 2015, the
Court ruled against Plaintiff on the standard of review and on the merits of the case. Plaintiff
During Plaintiff’s oral argument, the appellate panel appeared prepared to summarily
affirm. Then, Liberty Life took the podium and stipulated that Pfenning should have received de
novo review in 2014. The Sixth Circuit Court of Appeals remanded the case to this Court to
reevaluate the claim under the de novo standard of review. On June 28, 2017, the Court awarded
Plaintiff benefits. Doc. 31. Plaintiff now moves the Court for an award of fees.
In an ERISA action by a plan participant, the Court has discretion to award reasonable
attorney’s fees and costs. 29 U.S.C. § 1132(g)(1). Analysis of whether attorney’s fees should be
awarded in an ERISA case proceeds in two steps. First, the Court assesses whether the Plaintiff
has obtained “some degree of success on the merits.” Hardt v. Reliance Standard Life Ins. Co.,
560 U.S. 242, 254 (2010). If the Court concludes that Plaintiff has achieved some success on the
merits, the Court then applies a five factor test set out in Secretary of Dep’t of Labor v. King, 775
F. 2d 666 (6th Cir. 1985). See McKay v. Reliance Standard Life Ins. Co., 428 Fed. App’x 537,
545 (6th Cir. 2011). Even achieving a remand has been found to be, “some success on the
merits.” See Hardt at 2159; McKay at 547. Thus, Pfenning has achieved some success on the
When an ERISA plaintiff has achieved some success on the merits, an award of attorney
fees is discretionary. In exercising its discretion to award fees, the Sixth Circuit has directed
district courts to consider the following factors: 1. The 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. King, 775 F 2d at 669. Each of these factors is considered, in turn.
The degree of culpability
Liberty Life’s actions in this case demonstrate a degree of culpability. “Where a plan
administrator engages in an inadequate review of a beneficiary’s claim or otherwise acts
improperly in denying benefits,” the culpability aspect of the King test is satisfied. Shelby County
Health Care Corp v. Majestic Star Casino, 581 F 3d 355, 377 (6th Cir. 2009); see also Moon v.
Unum Provident Corp., 461 F 3d 639, 643-44 (6th Cir. 2006) (concluding that Unum was
culpable under King because, inter alia, the physician on whose opinion the plan’s fiduciaries
relied never examined the claimant; Unum’s review of the administrative record was highly
selective; and the physician reviewer upon whose judgment the decision turned ignored
substantial evidence in the record showing that the claimant was disabled). Liberty Life’s
conduct in this case reflects an uneven execution of its duties as claim administrator for the
Farmers Group, Inc., LTD Plan.
Liberty Life argued that Pfenning was not entitled to de novo review (Docs. 13 & 15).
The Court’s Order dated December 23, 2015, agreed with Liberty Life that the arbitrary and
capricious standard of review should be applied. While Liberty Life argued against de novo
review in this Court, it argued the opposite for another Farmers’ employee seeking long-term
disability in the Western District of Michigan. In a November 2015 filing in Sikkema v. Liberty,
Case No. 1:15-cv-494, (W.D. Mich., Sept. 6, 2016), counsel for Liberty Life stipulated to de
novo review under the same plan. Despite stipulating to de novo review in November 2015,
Liberty Life continued to argue in favor of arbitrary and capricious in its Sixth Circuit brief in
Given the date of the Sikkema stipulation, Liberty Life could have notified this Court of
its change of heart before this Court issued its ruling on December 28, 2015. This factor
demonstrates a degree of culpability and bad faith and weighs in favor of granting fees to
2. Ability to pay fees
Liberty Life Assurance Company of Boston is part of Liberty Mutual Holding Company,
(www.libertymutualgroup.com), Liberty Mutual Holding Company, Inc., for the year 2015, had
total net income of $5.4 million, and total equity of $19.241 billion. For 2016, the holding
company reported $125.6 billion of assets and $38.3 billion of revenues. Liberty Life can pay
the fee award requested. This factor also favors an award of fees.
3. Deterrent effect of a fee award
The third factor is “whether the fee award will have a deterrent effect on other plan
administrators.” Bowers at *4, citing Gaeth v. Hartford Life Ins. Co., 538 F 3d 524, 532 (6th Cir.
2008). “The deterrent effect on other plan administrators is likely to have more significance in a
case where the defendant is highly culpable–where ‘deliberate misconduct is in the offing,’
rather than when the plan administrator has just made an ‘honest mistake.’” Bowers, ibid., citing
Foltice v. Guardsman Products, Inc., 98 F 3d 933, 937 (6th Cir. 1996); see also Holler, 737 F.
Supp. 2d at 906 (“Plaintiff’s fees will warn plan administrators that ‘before terminating a plan
participant’s benefits, a plan administrator should ensure that the opinions upon which they rely
to make their decisions are based on a thorough review of the administrative record.’”); Potter,
2011 WL 4852334 at *8 (“A fee award may deter other plan administrators where the facts of
the case ‘are not so unique that they fail to serve any deterrence value to other insurance
companies under similar circumstances,’ and where the court’s opinion ‘articulated important
principles that all plan administrators should heed.’”) (quoting Gaeth, 538 F 3d at 532). “An
award of fees in this case further confirms that insurers must perform meaningful claim reviews.
‘If the only consequence of an arbitrary denial of benefits is the chance of being sued and a
possibility of reinstatement of benefits at some future date, insurance companies, with this strong
conflict of interest, will have little incentive to adhere to their fiduciary obligations.’” Niswonger,
2011 WL 4543929 at *5, quoting Plummer v. Hartford Life Ins. Co., Case No. C-3-06-94, 2007
WL 838926, at *2 (S.D. Ohio, March 15, 2007).
Liberty Life advocated for a standard of review that was different from the one mandated
by California law (and the insurance policy) and compounded the problem by adopting
inconsistent positions for persons who are beneficiaries under the same plan. In order for ERISA
to achieve its statutory promise of efficiency, predictability and uniformity, claim administrators
like Liberty Life must consider the effect of the actions it takes. See, Conkright v. Frommert, 559
US 506 (2010). According to the Farmers Insurance website, (www.Farmers.com/about-us),
Farmers employs 21,000 people across the country (See Exhibit C). Each of those 21,000 people
are part of a class of employees under the Plan insured by Liberty Life. Administering plans
consistently, predictably and uniformly is a vital feature of ERISA.
The deterrent effect of a fee award must be calculated prospectively, but it is reasonable
to conclude that insurers and plan administrators take notice of these awards. An award of fees
re-orients an errant plan insurer to the idea that they perform a “fiduciary function” for claim
beneficiaries and that they shall avoid activities that “are below market standards.” See Glenn v.
Metlife, 461 F 3d 660 (6th Cir. 2006); see also, McKay v. Reliance Standard, 428 Fed. App’x
537 (6th Cir. June 27, 2011).
Choice of law provisions are currently a concern in ERISA plans. Some choice of law
provisions embrace a specific state law which occasionally bans discretionary language in group
policies. States like California, Illinois and Texas, ban discretionary language in group disability
policies. Thus, an ERISA plan administrator must be familiar with many individual state statutes
which can modify the standard of review. See, e.g., Granger v. Life Ins. Co. of North America,
Case No. 6:14-cv-1820, (M.D. Fla., May 26, 2016). The United States Supreme Court and
several appellate courts have held that statutes which eliminate discretion are saved from ERISA
preemption. See Rush Prudential HMO, Inc. v. Moran, 536 U.S. 355 (2002), and more recently
Fontaine v. Metropolitan Life Ins. Co., 800 F. 3d 883 (7th Cir., 2015). This development is
relevant to claim administrators who administer benefits to employees residing in multiple states.
Thus, prospectively, an award of fees is likely to have an impact by encouraging plan
administrators to seek consistency in their approach.
Prospectively, other plan administrators might be more careful to avoid litigating against
claimant for years before stipulating to a standard of review that favors the claimant or
rearranging the actual occupational duties performed by the claimant in favor of undefined
standards. An award of fees would emphasize to multistate plan administrators the idea that all
members of the Plan should be treated equally. This factor weighs in favor of attorney’s fees to
4. Whether a common benefit was sought or significant legal questions resolved
Pfenning filed this claim for his own benefit. He sought remedies under § 502(a)(1)(b)
which allows an individual to seek redress. While Pfenning did not seek to confer a common
benefit, he did. By refocusing Liberty Life to the language in its own policy, Pfenning helped
ensure uniformity, clarity and predictability for the other 21,000 Farmers Insurance employees
across the United States, all of whom are entitled to de novo review. Now Liberty Life is aware
that the text of its insurance agreement will not allow a disregard of actual occupational duties
performed for Farmers Insurance during what the contract refers to as the “own occupation”
5. The relative merits of the parties’ positions
Plaintiff examined the policy, the administrative record, the governing law provisions and
searched the dockets of other states to see what standard of review was being used to adjudicate
long-term disability claims under the Farmers LTD Plan. In King v. Liberty Life Assur. Co. of
Boston and Farmers Group, Inc., Case No. CV-15-1806-JFW (C.D. Cal. 2015), the Plaintiff and
Plan stipulated to de novo review because of the operation of California law. In the instant case,
Liberty Life fought de novo review while it was giving it to Farmers’ employees in the Western
District of Michigan. See Sikkema. Under a de novo review, Liberty Life’s position lacked
merit. Liberty Life’s reading allows for the possibility of an employee, thinking he had coverage
for disability, being displaced by disability from what Liberty describes as ‘own job’ but not
necessarily own occupation—telling the insured, in effect, “Even though you can’t hold your old
job, you ought to be able to find one like it, even though you’re now partially disabled.”
Pfenning’s progressive deterioration will likely eventually render him permanently
disabled, but he will not have succeeded in holding onto his employment long enough for that
disability to result in long-term disability payments. Liberty seeks to deprive him of even shortterm payments as well. Thus, this factor weighs in favor of awarded fees.
II. The Reasonableness of the Fees Requested
Pfenning seeks attorney’s fees as follows: $110,397.50 for attorney time up to the filing
of the instant motion; $3,720.00 in additional time for his reply brief, $6,244.50 for paralegal
time; and $905.00 in costs associated with filing fees. Pfenning has submitted evidence to
support a finding that the requested fees are reasonable. Liberty Life does not contest this. The
Court finds that the hourly rate for legal services is reasonable and that the hours expended were
III. Pre-Judgment Interest
Plaintiff’s Complaint requested the payment of pre-judgment interest if Plaintiff was
successful. The Underlying Benefit Long-Term Disability benefits are reduced by any Social
Security award. On July 30, 2015, Pfenning won a claim for SSDI benefits in the amount of
$2,119.00 per month. Pfenning's long-term disability payment is $3,755.40 per month. Thus,
Pfenning's Liberty Life payments were reduced to $1,636.40 per month. Meaning the amount
Liberty Life owes for the own occupation period is: $1,636.40 x 24 months = $39,273.60.
Benefits under the "any occupation" standard have not been determined by the Plan
Administrator, Liberty Life.1
The determination of the prejudgment interest rate is within the sound discretion of the
district court. Ford v. Uniroyal Pension Plan, 154 F.3d 613, 619 (6th Cir. 1998) (citing EEOC v.
Wooster Brush Co. Employees Relief Ass'n, 727 F.2d 566, 579 (6th Cir. 1984)). Although
prejudgment interest is typically not punitive, an excessive prejudgment interest rate would overcompensate an ERISA plaintiff, thereby transforming the award of prejudgment interest from a
compensatory damage award to a punitive one in contravention of ERISA's remedial goal of
simply placing the plaintiff in the position he or she would have occupied but for the defendant's
wrongdoing. See Hizer v. General Motors Corp., Allison Gas Turbine Div., 888 F. Supp. 1453,
1463 (S.D. Ind. 1995). Similarly, an exceedingly low prejudgment interest rate fails to make the
While it does not appear to the Court that Pfenning can show that his condition deteriorated fast enough for him to
qualify for long-term disability payments, that question is not before the Court.
plaintiff whole by inadequately compensating him or her for the lost use of money. See id.
Consequently, utilization of an interest rate that is either excessive or inadequate frustrates
ERISA's remedial scheme. Ford v. Uniroyal Pension Plan, 154 F.3d 613, 618 (6th Cir.
1998). The award of interest must not be punitive in nature, but rather should compensate the
affected participants for lost interest they could have earned if the money had not been
improperly withheld. Cage v. Gen. Motors Defined Ben. Salaried Plan, 98 F. Supp. 2d 803, 810
(E.D. Mich. 1999) (citing Ford, 154 F.3d at 618).
Utilizing Ohio’s prejudgment method as stated in ORC 1343.03, the Court awards
prejudgment interest at a rate of 3% for 2014; 3% for 2015; 3% for 2016; and 4% for 2017.
Plaintiff Douglas Pfenning’s Motion for an Award of Attorney’s Fees and Costs, Doc. 33,
is GRANTED. Plaintiff is ORDERED within 20 days to submit to the Court a proposed
judgment order awarding fees and costs in the amount of $121,267.00 and prejudgment interest
at a rate of 3% for 2014; 3% for 2015; 3% for 2016; and 4% for 2017, and simultaneously to
inform the Court, pursuant to Local Rule 7.3, whether there will be an objection contesting the
calculations or form of the proposed order. Any objection will be due within 20 days of filing of
the proposed order.
DONE and ORDERED in Dayton, Ohio, this Thursday, October 19, 2017.
s/Thomas M. Rose
THOMAS M. ROSE
UNITED STATES DISTRICT JUDGE
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