Attorneys Fees Awarded to Defendant in ERISA Disability Benefit Claim

May 3, 2018 | Blog |

By: Jennifer Danish

Courts infrequently award attorneys’ fees to defendants for having to defend themselves in ERISA disability benefit claims. Recently though, the Court, in James W. Hackney v. Allmed Healthcare Management, Inc., No. 3:15-CV-00075-GFVT, 2018 WL 1981902 (E.D. Ky. Apr. 27, 2018) ordered an unsuccessful plaintiff to pay the defendant attorneys’ fees and costs, because the plaintiff pursued a cause of action not generally recognized as available under ERISA.

Hackney brought a state law negligence claim against Allmed for rendering an unlicensed medical opinion about him in connection with his long-term disability benefit claim under an ERISA-governed benefit plan insured by Lincoln National. The district court construed Hackney’s claim as one for the improper denial of long-term disability benefits, which could be filed under ERISA Section 502(a)(1)(B). Hackney v. Allmed Healthcare Mgmt., Inc., No. 3:15-CV-00075-GFVT, 2016 WL 1726098, at *3 (E.D. Ky. Apr. 28, 2016), judgment entered, No. 3:15-CV-00075-GFVT, 2016 WL 1728963 (E.D. Ky. Apr. 28, 2016), and aff’d, 679 F. App’x 454 (6th Cir. 2017), cert. denied, 138 S. Ct. 236, 199 L. Ed. 2d 122 (2017).  The court also held that
even if the claim against Allmed was not precluded by a prior judgment in the LTD case against Lincoln National, the claim against Allmed could not proceed under ERISA because Allmed is not a proper defendant in an ERISA suit challenging the wrongful denial of benefits. Id.

Hackney appealed his case to the Sixth Circuit Court of Appeals, and the decision was affirmed. The Sixth Circuit, in an unpublished decision, found that the state-law
claim against Allmed is completely preempted by ERISA, because, in essence, it is about a denial of benefits under an ERISA plan, and Allmed did not owe Hackney an independent duty under the Kentucky medical licensing statute. Hackney v. AllMed Healthcare Mgmt. Inc., 679 F. App’x 454, 459, 62 EB Cases 2564 (6th Cir.), cert. denied, 138 S. Ct. 236, 199 L. Ed. 2d 122 (2017). The court also agreed with the district court that Allmed was not a proper defendant for an ERISA claim, because it was not the plan administrator. Id. Hackney filed a writ a certiorari to the U.S. Supreme Court, which was denied. Hackney v. Allmed Healthcare Mgmt. Inc., 138 S. Ct. 236, 199 L. Ed. 2d 122 (2017).

AllMed initially filed its Motion for Attorneys’ Fees on May 12, 2016. Hackney v. Allmed Healthcare Mgmt. Inc., No. 3:15-CV-00075-GFVT, 2018 WL at *1. Although the motion was briefed, the underlying matter was still pending before the Sixth Circuit and the Court denied AllMed’s motion without prejudice and directed them to re-file following the resolution of Mr. Hackney’s appeal. Id. Three days after the Sixth Circuit affirmed, AllMed refiled its motion. Id. After briefing, the Court awarded attorneys’ fees, but directed additional briefing as to the amount owed by Mr. Hackney to AllMed. Id. The Court noted, “Mr. Hackney has repeatedly objected to any award for fees and or costs, but until now, has raised no specific objections to the amounts specified in AllMed’s declarations.” Id. In reviewing this case, this appears to have been a point where Plaintiff made a vital mistake—failing to raise specific objections to the award of fees and the award of fees in the proposed amounts early on.

The district court adopted the Magistrate Judge’s recommendation to award Allmed attorneys’
fees in the amount of $81,589.95 and expenses in the amount of $1,520.35. The Court stated:

Even though Mr. Hackney did not object to the claimed hours prior to Judge Atkins’s Recommended Disposition, he now files timely objections to the award. [R. 59.] However, only a few of these objections are adequately specific, and many of his objections lack merit. Mr. Hackney begins by filing several “Specific Objections to R&R,” and “General Issues and Additional Objections,” all of which fail to identify specific factual or legal issues from the Report and Recommendation, instead objecting to an award of any fees at all. The Court is not required to conduct a de novo review on such generalized objections. Robert v. Tesson, 507 F.3d 981, 994 (6th Cir. 2007); Howard v. Sec’y of Health & Human Servs., 932 F.2d 505, 509 (6th Cir. 1991).

Hackney v. Allmed Healthcare Mgmt. Inc., No. 3:15-CV-00075-GFVT, 2018 WL at *2.

Hackney identified four “Specific Objections to R&R,” in which he objected to any award of attorneys’ fees and costs based on his belief that the court should not have awarded fees and costs to AllMed at all. Id. The Court indicated that these were not objections to Judge Atkins’s Recommended Disposition, which merely addresses the amount of award, and that such objections were appropriately addressed in a motion under Fed. R. Civ. Pro. 60, which Hackney did not file. The Court summarized, “Mr. Hackney merely attempts to restate his displeasure with the Court’s previously ruling, and therefore, the Court refuses to address this objection. See Moore v. Prevo, 379 F. App’x 425, 428 n.6 (6th Cir. 2010); Murr v. United States, 200 F. 3d 895, 902 n.1 (6th Cir. 2000).” Id. And the Court concluded, “Mr. Hackney has had ample opportunity to address AllMed’s request and has, instead, used that opportunity to argue he should not be required to pay fees and costs at all. This objection also lacks merit.” Hackney v. Allmed Healthcare Mgmt. Inc., No. 3:15-CV-00075-GFVT, 2018 WL at *3.

Following these objections, Hackney addressed “General Issues and Additional Objections,” again outlining why AllMed should not be awarded attorneys’ fees and costs. Id. He claims neither party can satisfy the ERISA fee statute because Hackney never asserted an ERISA claim. The Court was unpersuaded and wrote, “This argument has been addressed ad nauseam. [R. 28; R. 37; R. 53; R. 58.] This Court and the Sixth Circuit have both determined the claim was governed by 29 U.S.C. § 1132. Id. Accordingly, the Court refuses to reconsider this objection.” Id.

Hackney again stated his belief that AllMed should not be awarded fees or costs because of its failure to comply with Federal and Local Rules. Id. He then raised a new argument, stating AllMed should not recover fees and costs because they did not incur any fees. Id. Hackney asserted without adequate evidence that Lincoln National Insurance Company would indemnify AllMed for such fees and costs. Id. The Court concluded again that these objections related to this Court’s previous award of fees and costs, not to the Report and Recommendation, and declined to address this objection.

The Court addressed some of the balance of Hackney’s objections that it deemed sufficiently specific and found:

  • Allmed is entitled to fees even though the billing entries did not include dates but included the bill number, the number of hours, the bill rate, and a brief redacted summary
    of the work. The Court explained that poor record keeping could reduce a fee, not result in a denial. Id, citing Ohio Right to Life Soc., Inc., v. Ohio Elections Comm’n, 590 F. App’x 597, 603 (6th Cir. 2014); Reed v. Rhodes, 179 F.3d 453, 472 (6th Cir. 1999).
  • There is no law forbidding the award of attorneys’ fees when an attorney does not appear before the Court and simply works for a legal firm representing a party where other
    firm employees are admitted to practice before the Court. Hackney v. Allmed Healthcare Mgmt. Inc., 3:15-CV-00075-GFVT, 2018 WL at *4.
  • Allmed is entitled to recover fees opposing a motion at the Supreme Court that Hackney later withdrew and filing a response to the petition for writ of certiorari that was not
    Allmed succeeded in its opposition, because the Supreme Court denied the petition. Hackney v. Allmed Healthcare Mgmt. Inc., No. 3:15-CV-00075-GFVT, 2018 WL at *5.
  • Allmed is entitled to recover for all time spent on research, including 46 hours, totally less than 13% of the total time expended in the case. Id.
  • Allmed is entitled to recover time spent on unsuccessful efforts; “the fee will not be reduced simply because Allmed did not succeed on each motion it filed.” Id.
  • Allmed can recover time relating to communications with Lincoln National, because Hackney failed to provide any legal justification for this argument. Id.
  • Allmed is entitled to its sought-after costs even though costs labeled “copying” did not provide more detail. Id.
  • Allmed is not entitled to an additional $4,935 in fees for responding to Hackney’s objections to the award, because the issue has not been fully briefed and Hackney has not had
    the opportunity to respond. Hackney v. Allmed Healthcare Mgmt. Inc., 3:15-CV-00075-GFVT, 2018 WL at *6.

The reality is based on the language of ERISA and emphasized by this Court’s order, a plaintiff who pushes the envelope in an attempt to expand the scope of remedies available risks being found responsible for defendants’ attorney fees and costs. Plaintiffs must more creatively seek relief against third-party service providers, like Allmed, who routinely provide “paper reviews” of disability claims that can destroy the lives of claimants whose benefits are stopped in reliance on a doctor who never examined them in person and conducted a limited paper review of records—a third-party service provider with a conflict of interest between having a doctor render a fair opinion and the company’s business interests in maintaining the insurance industry’s business.

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