Court Awards Substantial Attorney's Fees to Plaintiff in ERISA Disability Case

Posted on June 5, 2011 by John Wood

In this ERISA disability case, the federal district court in Chicago awarded attorney’s fees of $109,312.75 to the successful plaintiff, Holmstrom.  The case started after MetLife decided to terminate her claim for long-term disability benefits. She sued MetLife and her employer’s benefit plan.  She voluntarily dismissed the suit after MetLife offered to consider a second internal appeal.  After MetLife refused to change its mind, she re-filed her case.

After the district court upheld MetLife’s termination, she appealed to the Seventh Circuit Court of Appeals. The appeals court held in Holmstrom’s favor, finding that MetLife’s had acted arbitrarily and capriciously (see Holmstrom v. Metropolitan Life Ins. Co., 615 F. Supp. 2d 722 (7th Cir. 2010)). The appeals court reinstated her disability benefits but left the issue of attorney’s fees for the district court to decide.

With regard to that issue, the district court noted that 29 U.S.C. § 1132(g)(1) provides that the “court in its discretion may allow a reasonable attorney’s fee and costs of action to either party.”  It stated that in Hardt v. Reliance Standard Life Ins. Co., 130 S. Ct. 2149 (2010), the Supreme Court interpreted ERISA's fee provision and held that fees may be awarded to ERISA litigants who have “achieved some degree of success on the merits.”  The court found that Hardt supplanted the Seventh Circuit’s “prevailing party” standard for ERISA fee awards.

The district court ruled that Holmstrom had undoubtedly achieved ‘some degree of success on the merits,’ since the Seventh Circuit had reinstated her benefits.  As the court stated, “[o]nce a party has achieved ‘some degree of success on the merits,’ a court must exercise its discretion to determine whether an attorney’s fee should be granted.” The court referenced two tests pertaining to the exercise of that discretion. The court said that, under the first test, fees may be withheld if the losing party’s position was “substantially justified.” The second test focuses on the five factors widely cited in pre-Hardt decisions:

1) the degree of the offending parties' culpability or bad faith; 2) the degree of the ability of the offending parties to satisfy personally an award of attorney's fees; 3) whether or not an award of attorney's fees against the offending parties would deter other persons acting under similar circumstances; 4) the amount of benefit conferred on members of the pension plan as a whole; and 5) the relative merits of the parties' positions.

The court held that Holmstrom was entitled to fees under either test, although the court questioned the viability of the tests in the wake of Hardt. 

The defendants argued that fees should not be awarded to Holmstrom for attorney work relating to the first lawsuit (the one she voluntarily dismissed to pursue her second internal appeal) or for attorney work performed during the second internal appeal itself.  The district court approved fees relating to the initial lawsuit, because that work led to MetLife offering to reconsider her claim.  The district court did not award fees relating to the second internal appeal.  Courts have awarded fees in connection with court-ordered remands, the court said.  But Holmstrom had voluntarily dismissed her initial case. 

The defendants argued for a reduction because they had prevailed on their counter-claim to recover an alleged overpayment of benefits, and because certain arguments and motions of Holmstrom had not been successful.  The district court disagreed, holding that the case must be reviewed as a whole.  Indeed, “the issues on which [Holmstrom] failed were part of and related to the claim on which they succeeded—in that they involved a ‘common core of facts’ and were ‘based on related legal theories.”  (citation omitted).

Upholding the requested hourly rates of Holmstrom’s lawyers, the district court arrived at the attorney’s fee amount.  The court also awarded $1,031 in recoverable costs under 29 U.S.C. § 1920. 

The decision is Holmstrom v. Metropolitan Life Ins. Co., 2011 U.S. Dist. LEXIS 58766 (N.D. Ill. May 31, 2011). 

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Court Orders CIGNA to Pay Six-Figure Attorney's Fees

Posted on April 8, 2009 by John Wood

Steven Alfano won his ERISA claim for long-term disability benefits against CIGNA. The district court had previously ruled that there was “no sound basis in the record to support CIGNA’s finding that plaintiff’s back condition … had in fact improved.” Alfano sought attorney’s fees from CIGNA under 29 U.S.C. § 1132(g)(1). In its analysis, the court considered the following factors under Second Circuit jurisprudence:

(1) defendant's culpability or bad faith, (2) defendant's ability to withstand payment, (3) the extent to which an award would deter others from similar conduct, (4) the relative merits of the parties' positions, and (5) whether the action confers a common benefit on a class.

The court applied these factors and awarded attorney’s fees of $105,840 to Alfano.

 

As to the first factor, the court found that “CIGNA may not have acted outrageously or in subjective bad faith, but the Court's finding that plaintiff was clearly entitled to long-term disability benefits, and that there was no sound basis for CIGNA's termination of such benefits, renders CIGNA culpable.  While this factor might weigh more heavily in plaintiff's favor had CIGNA acted in bad faith, it nevertheless counsels in favor of an award of attorney's fees.”  

 

As to the second factor, the court pointed to Second Circuit precedent holding that the ability to pay does not weigh heavily in favor of an attorney’s fee award. Interestingly, the court noted that a defendant’s [and presumably plaintiff’s] inability to pay does weigh against such an award. 

 

The court likewise reasoned that the third factor (deterrent effect) favored Alfano, stating: “It is undisputed that the costs of litigating a denial of benefits under ERISA can be high, even when the benefits themselves may not be generous. Not only must losing plaintiffs pay their own fees, but all plaintiffs assume a risk of an award of fees against them.”

 

The court ruled that the relative positions of the parties militated in favor of Alfano (the fourth factor), but that Alfano’s case did not confer a common benefit on a group (the fifth factor), since the case did not challenge any across-the-board rule of practice but instead dealt with the facts of his situation.

 

In arriving at the fee amount, the court approved 235.20 hours (reduced from the 272.20 hours expended by counsel) at the “reasonable hourly rate of $450.”  The court also awarded prejudgment interest and costs.

 

The case is Alfano v. CIGNA Life Ins. Co. of New York, 2009 U.S. Dist. LEXIS 28118 (S.D.N.Y. Apr. 2, 2009).

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