Opinion
Case No. 3:04 CV 7553.
March 21, 2006
MEMORANDUM OPINION AND ORDER
On January 13, 2006, the Court issued its Memorandum Opinion and Order indicating its ruling in this case. (See Doc. No. 60). The Court reserved issuing the final judgment until the parties complied with certain specific requests. Those are now complete and the matter is ripe for a final determination and judgment entry.
The Court also offered the parties an opportunity to request mediation to mutually resolve both the short-term and long-term disability benefits for this plaintiff, as well as attorney fees and costs. However, the parties let the February 1, 2006 deadline pass without making any request for mediation.
I. SUMMARY OF PROCEEDINGS TO DATE
On September 7, 2004, plaintiff Kimberly Kohrn filed this lawsuit alleging that she was wrongfully denied both short-term disability benefits ("STD") and long-term disability benefits ("LTD") under ERISA plans maintained by her former employer, CitiFinancial. Plaintiff, who had been diagnosed with Fibromyalgia Syndrome ("FMS"), applied for and received STD benefits for the period March 13, 2001 through April 17, 2001, at 100% of her pay. By letter dated June 11, 2001, defendants denied plaintiff the last two weeks of STD benefits at 100%, plus 20 more weeks at 66 2/3 % of her pay. As a result of the denial of the full range of STD benefits, plaintiff was not eligible to apply for LTD benefits under the relevant ERISA plan. Plaintiff submitted an administrative appeal, but the decision to deny further benefits was upheld by letter dated September 19, 2001. When plaintiff attempted her second-stage appeal, initiated by letter from her counsel dated September 28, 2001, defendants lost the paperwork, a fact that was revealed only after plaintiff, through counsel, inquired in November 2002 as to the status of her timely-filed appeal and was informed by letter dated January 15, 2003 that defendants were "unable to locate a disability claim or appeal submitted by Kimberly Kohrn." (AR 555). Ten months later, on November 18, 2003, defendants finally agreed to let plaintiff resubmit her appeal, so long as she did so within 30 days.Plaintiff did resubmit on December 15, 2003. However, defendants never issued any determination, despite plaintiff's repeated inquiries. Therefore, she never had an opportunity to have the denial of the remainder of her STD benefits resolved administratively and, lacking an award of full STD benefits, she never became eligible to apply for LTD benefits.
Defendants later argued that they never resolved the appeal because they did not receive it until December 22, 2003, two or three days late. Neither plaintiff nor her counsel were ever told that when they made repeated inquiries about the status of her appeal.
At the Case Management Conference conducted by this Court on May 13, 2005, the defendants finally admitted to having located the original appeal and administrative record. This admission would probably never have been forthcoming had plaintiff not filed this lawsuit.
Plaintiff was essentially forced to file this lawsuit because of defendants' inaction.
In a lengthy Memorandum Opinion and Order dated January 13, 2006 (See Doc. No. 60), this Court ruled that: (1) based on the medical records available to the defendants at the time plaintiff initially applied for STD benefits and then later engaged in her first level appeal, she was entitled to the full panoply of STD benefits, that is, six weeks at 100% of her pay, plus 20 more weeks at 66 2/3 % of her pay; and, (2) since she had been denied those full benefits, they must now be awarded in an amount that must be mutually decided by the parties and supplied to this Court in writing. The parties have since agreed that the past-due amount of STD benefits is $9,476.00. (See Doc. No. 64).
Plaintiff believes she is entitled to both pre-judgment and post-judgment interest on this amount; she filed a motion seeking that clarification. (Doc. No. 65). The Court requested briefing and will address the topic of pre- and post-judgment interest later in this opinion.
The Court also ruled on January 13, 2006 that, since plaintiff had been wrongfully denied her opportunity to apply for LTD benefits, she must be allowed that opportunity now. Because the defendants had consistently failed and/or refused to identify the Plan Administrator, the Court required them to file under penalty of perjury a declaration as to the identity of the Plan Administrator and the mailing address where plaintiff should file her LTD claim. The Court declared that defendants would be bound by their declarations "in all future administrative and/or court proceedings involving this plaintiff's long-term disability application." (Doc. No. 60, at 19). On February 3, 2006, defendants declared the name and address of the Plan Administrator as follows:
Since the administrative record, including medical records, had never been developed beyond about November or December of 2001, the Court could not make a de novo determination on plaintiff's present claim that she is entitled to LTD benefits. In view of defendants' stonewalling, the Court was sympathetic to plaintiff's plight, but could find no support in the law or facts for the Court to make an independent LTD determination without first allowing time for the usual administrative process to work.
Although defendants now argue that plaintiff did not, therefore, prevail on her LTD claim, that is an improper characterization of the proceedings. She certainly did prevail in the sense that this Court ruled, contrary to defendants' arguments, that plaintiff was entitled now to present her application for LTD benefits, notwithstanding any deadlines that might be contained in the Plan documents. In other words, the Court granted plaintiff what the defendants had so far refused to grant, namely, an opportunity to apply for LTD benefits and to present current medical support for her claimed entitlement to those benefits. This constitutes "prevailing" in the context of this case.
Plans Administration Committee of Citigroup Inc. 125 Broad Street, 8th Floor New York, New York 10004
In addition, they declared that Metropolitan Life Insurance Company is the Claims Administrator and that any LTD application made by the plaintiff should be sent to the following:
Laura Sullivan Metropolitan Life Insurance Company 1660 Feehanville Drive Mount Prospect, IL 60056 Telephone: 847-391-1627 Fax: 847-391-1809
(See Doc. Nos. 61, 62).
The Court also ruled on January 13, 2006 that plaintiff would be entitled to recover her attorney fees and costs and that she should file an application for the same. She has done so (see Doc. No. 63). Defendants have filed their opposition. (Doc. Nos. 67, 68). The Court will discuss this separately below.
Finally, plaintiff recently sought clarification that she should be entitled to pre- and post-judgment interest on her award of STD benefits and that the defendants must consider her LTD application, once made, notwithstanding any limitations period in the relevant Plan. This Court then ruled that defendants were required to ignore any limitation period, provided plaintiff makes her LTD claim in a reasonably timely manner following issuance of the Judgment Entry in this case. The Court directed briefing with respect to pre- and post-judgment interest. This issue is discussed separately below.
II. ATTORNEY FEES AND COSTS
A. The Law Relating to Fee Awards Under ERISA
In an ERISA case, although there is no presumption that attorney fees and costs will be automatically awarded, see Foltice v. Guardsman Prods., Inc., 98 F.3d 933, 936 (6th Cir. 1996), the district court has broad discretion in awarding attorney fees under 29 U.S.C. § 1132(g). Secretary of Dep't of Labor v. King, 775 F.2d 666, 669 (6th Cir. 1985). The King court adopted five factors as relevant to a district court's determination:
(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.
B. Application of the Five Factors to this Case
Although the Court ruled in its January 13, 2006 Memorandum Opinion and Order that plaintiff was entitled to attorney fees and costs, it did so without any analysis. That analysis is contained herein.
In this case, the defendants' denial of plaintiff's full STD benefits constituted, at the very least, culpability and, at worst, bad faith. As explained in the Memorandum Opinion and Order of January 13, 2006, defendants conveniently chose to mischaracterize the nature of plaintiff's job, concluding contrary to her actual job description that her job was "sedentary in nature." They demanded objective medical evidence from the plaintiff, claimed she had none, and then, although conducting no independent medical examination, relied on thesubjective assessment of one clinical psychologist that her problems were "emotional." They reached this conclusion despite the assessments of plaintiff's treating physicians that she was physically disabled by FMS. Then, to add insult to injury, defendants lost plaintiff's second-level administrative appeal, refused to respond to her inquiries and, after an attorney got involved, allowed her to resubmit her appeal, but then failed to rule on it, belatedly claiming that they did not have to rule because she had resubmitted the appeal a couple days late. As noted in this Court's ruling in January, "[w]ould that the defendants were as demanding of themselves as they are of disabled claimants!" (Doc. No. 60, at 15 n. 14). The first King factor weighs in plaintiff's favor.
Defendants are clearly in a position to satisfy an award of fees and costs. They do not argue otherwise. Therefore, the second King factor also weighs in plaintiff's favor.
In this Court's experience, it is not at all unusual for insurers to act in the way defendants in this case acted. Delay and refusal are commonplace. Insureds simply wear out fighting for their rights. In the instant case, the Court finds particularly troubling the fact that the defendants initially claimed that they had no appeal from the plaintiff. Only much, much later (in fact not until the Case Management Conference on May 13, 2005) did the defendants admit that they had the file. In addition, as noted in the January 13 opinion, they seemed intent on hiding the identity of the plan administrator, simply leaving it to the plaintiff to guess who that might be and then refusing to respond when she sent her paperwork to the wrong entity, clearly suggesting that she had guessed wrong. This behavior is decidedly improper and an award of fees and costs would undoubtedly give pause to others under similar circumstances. ERISA benefits are supposed to be just that — benefits. One should not have to work so hard to get them! The third King factor weighs in plaintiff's favor.
Although plaintiff did not seek to confer a common benefit on all participants in the ERISA disability plans, perhaps an award of fees and costs will have that effect. If the award deters such conduct in the future, other participants trying to obtain their rightful benefits will not experience the difficulty plaintiff experienced. In that respect, the fourth King factor weighs in plaintiff's favor.
Finally, as explained at length in the January 13 Memorandum Opinion and Order, defendants' position had virtually no factual or legal basis, whereas plaintiff's position that she is disabled had considerable merit. Therefore, the fifth King factor weighs in plaintiff's favor.
In this Court's view, the King analysis weighs in plaintiff's favor and justifies an award of attorney's fees and costs. The Court will now turn to an examination of plaintiff's application which seeks $59,415.20 in fees and $2,469.65 in costs.
C. Plaintiff's Application for Fees and Costs (Doc. No. 63)
Having considered the five King factors to determine that plaintiff is entitled to recover her fees and costs, the Court must apply the "lodestar" method to calculate an appropriate award. See Hensley v. Eckerhart, 461 U.S. 424 (1983). This requires multiplying "the number of hours reasonably expended on the litigation . . . by a reasonable hourly rate." Id. at 433.
First, plaintiff is seeking fees at hourly rates of $265 for Attorney Kolodgy's work and $125 for Attorney Wisniewski's work. In addition, the fee statement itemizes work performed by one "LC" at an hourly rate of $90. Although there is no explanation, presumably, "LC" stands for "law clerk."
The fee statement also contains about 20 references to services performed by "PAR," who is unidentified, and appears to have billed at a rate of $80 per hour. PAR performed 13.55 hours of service, all in extremely small increments except for one 3-hour entry on October 27, 2005 to "prepare and revise Reply." Perhaps "PAR" stands for "paralegal." The Court is not going to guess, having already given plaintiff the benefit of the doubt on "LC." Therefore, the charges for "PAR" are denied and are not included in the total award.
Defendants have expressly stated that they are not challenging the reasonableness of the rates charged by the two attorneys and this Court can find no basis for any challenge. Clearly, plaintiff's two attorneys have sufficient experience to warrant the rates they charged and the Court expressly finds both rates to be reasonable.
Attorney Kolodgy was admitted to practice in Ohio in 1985, the Commonwealth of Kentucky in 1986, and the State of Michigan in 2004. Her practice concentrates in the area of healthcare law and related areas, including ERISA. Attorney Wisniewski was admitted to practice in Ohio in 2004. Her practice is similarly concentrated. Affidavits submitted with the fee application reflect that the rates charged by these attorneys are reasonable.
Defendants do challenge the work performed by "LC," mostly because they do not know the identity of "LC" and cannot, therefore, evaluate the legitimacy of the hours and/or the rate. Assuming, as the Court does judging from the nature of the tasks performed by "LC," that this person is a law clerk, without more information about this person's background and training, the Court concludes that $90 per hour is too generous, especially in view of the fact that one of the two attorneys is only charging $125 per hour. Therefore, the Court will reduce the rate for work performed by "LC" to $75 per hour. To the extent defendants argue that some of the work performed by "LC" took too long or was redundant, the Court is of the view that this is resolved by reducing the hourly rate. The Court finds no need to ferret out a fraction of an hour here and another fraction of an hour there to reduce the overall award. This Court's personal experience both in practice and on the bench will serve to provide a common sense judgment as to the reasonableness of the time spent and of the overall fee to be awarded.
There are a few itemized entries that do seem somewhat excessive to the Court from a time standpoint, for example, the number of hours it took to draft the complaint. On the other hand, these tasks were performed almost exclusively by "LC" who was working at a much lower rate than either of the attorneys, especially given the Court's instant reduction of that rate to $75. Since the Court applauds the practice of having a less-costly person work on the more routine tasks associated with a case, the Court will not penalize the plaintiff for the fact that the less-costly person is usually also less-experienced and, as a result, takes a little more time to perform the tasks.
In addition to the more general challenges to the amount of time spent on some tasks, defendant, The Plans Administration Committee of Citigroup ("the PAC"), has lodged several specific objections to the plaintiff's fee application. (See Doc. No. 67). The PAC strenuously objects to recovery of any fees relating to the administrative process. It also argues that it should not have to pay for redundant or unnecessary work performed by plaintiff's counsel. It further argues that the overall results achieved by plaintiff in this lawsuit do not warrant the large amount of fees claimed.
Defendant Metropolitan Life Insurance Company ("MetLife") filed a short memorandum in opposition to the application. (Doc. No. 68). MetLife argues that most of what this Court found to be wrong with the administrative process had nothing to do with MetLife's involvement in the initial STD benefits determination. MetLife argues that it should not be liable for any fees and, if it is found liable, the fees and costs should be limited for the reasons already raised by the PAC.
The Court is unwilling to attempt to parse the attorney fee liability of the two defendants who, for all practical purposes during the administrative proceedings, were joined at the hip. The Court believes that they can be held jointly and severally liable for the award of attorney fees and costs. There is nothing to prevent them from working something out privately as to how to divide the liability between them; however, this Court will not make that determination.
As for recovery of fees for tasks performed during the administrative process, although the Court agrees that, as a general principle, fees for the ordinarily short administrative process might not be appropriate, the Court expressly finds that most of what happened during the administrative process in this case was necessitated by defendants' culpable conduct. In other words, plaintiff would not have incurred anywhere near the years of expense that she did incur had the defendants simply done what was required of them.
Defendants point to Anderson v. Procter Gamble Co., 220 F.3d 440, 456 (6th Cir. 2000) for the proposition that "ERISA does not authorize recovery of attorneys' fees for work performed during the administrative exhaustion phase of a benefits proceeding." Indeed, that is an accurate quote. However, use of that quote fails to recognize that, in Anderson, the plaintiff had prevailed at the administrative level and filed a lawsuit for the sole purpose of recovering her fees. This is what the Sixth Circuit found to be precluded, stating: "Because Anderson did not file a civil action for any of the reasons set forth in § 1132(a), but filed suit only to recover attorneys' fees for legal work performed during her administrative claims proceeding, we find that § 1132(g) does not permit her to recover her costs." 220 F.3d at 452.
The instant case presents quite a different scenario. Here, plaintiff did not prevail in her administrative proceedings; in fact, she had to fight long and hard just to get the defendants to look at her appeal, an appeal which, ultimately, the defendants simply allowed to languish. Although defendants seemed to have rather routinely granted her four weeks of STD benefits without much fanfare, from there on out they fought her every inch of the way and did not always "fight fair," in this Court's view. Plaintiff incurred significant costs as a result and the defendants will not be permitted to escape reimbursing those costs by relying on Anderson. Unlike the plaintiff inAnderson who only sought attorney fees, plaintiff Kohrn filed this lawsuit to obtain the benefits to which she was entitled. The Court also concludes that a full award of fees, including those incurred during the administrative process, would have a significant and useful deterrent effect. Perhaps these and other defendants will think twice before treating claimants in the manner plaintiff Kohrn was treated.
The Court has closely examined the itemized statement supporting the application for attorney fees and concludes that the following constitutes an appropriate and reasonable award: $21,200.00 $26,250.00 $ 7,500.00 $54,950.00
The total number of hours granted is 390, which figures out to about 11 hours per month beginning in November 2002. Only 28 of those hours can be attributed to the administrative process — 7 hours for Attorney Kolodgy and the remaining 21 hours for "LC." Therefore, granting fees for the administrative process accounts for only $1,951.00 of the total fee award.
In summary, the Court awards to the plaintiff and against the defendants fees of $54,950.00 and costs of $451.65, totaling$55,401.65.
III. INTEREST
The parties have agreed that plaintiff is entitled to past-due STD benefits of $9,476.00. See Doc. No. 64. Plaintiff has moved for an order granting both pre- and post-judgment interest on that amount. (Doc. No. 65). The PAC has opposed granting any pre-judgment interest, but does not challenge the claim for post-judgment interest. (Doc. No. 70). The PAC simply declares that plaintiff is not entitled to pre-judgment interest "under the facts and circumstances of this case." It further asserts that even if plaintiff is entitled to prejudgment interest, it should be denied because, in the PAC's view, plaintiff asked for an incorrect interest rate. Plaintiff argued for the prime rate as of January 13, 2006, that is, 7.25%."Although ERISA does not mandate the award of prejudgment interest to prevailing plan participants, [the Sixth Circuit has] long recognized that the district court may do so at its discretion in accordance with general equitable principles."Ford v. Uniroyal Pension Plans, 154 F.3d 613, 616 (6th Cir. 1998). "[P]rejudgment interest awards under ERISA serve as compensation to a plaintiff for the lost use of money wrongly withheld[.]" Id. at 620.
In this case, the Court concludes, in its discretion, that pre-judgment interest is warranted by the facts. The Court turns now to the method for computing such interest.
Citing 28 U.S.C. § 1961, the Ford court approved the district court's granting of what is known as a "blended interest rate," arrived at "by looking to the average interest rate of the 52-week United States Treasury bills for the relevant period." Ford, 154 F.3d at 616.
Section 1961 now provides that post-judgment interest "shall be calculated from the date of the entry of the judgment, at a rate equal to the weekly average 1-year constant maturity Treasury yield, as published by the Board of Governors of the Federal Reserve System, for the calendar week preceding. [sic] the date of the judgment."
The Ford court noted: "[W]e have held previously that the statutory postjudgment framework set forth in 28 U.S.C. § 1961 is a reasonable method for calculating prejudgment interest awards."Ford, 154 F.3d at 619 (citing EEOC v. Wooster Brush Co. Employees Relief Ass'n, 727 F.2d 566, 579 (6th Cir. 1984)).
This Court will follow that same method. The "relevant period" for which pre-judgment interest should be awarded is the time during which plaintiff was denied the $9,476.00 in STD benefits that she should have been awarded. As defendants properly point out, this period began on April 18, 2001 and ended on October 24, 2001.
The relevant weekly rates for that period, according to the Federal Reserve Statistical releases, were as follows:
See http://www.federalreserve.gov/releases/h15/.
Week Ending Rate (%) Week Ending Rate (%)
04/20/01 4.04 07/27/01 3.59 04/27/01 3.82 08/03/01 3.56 05/04/01 3.90 08/10/01 3.50 05/11/01 3.76 08/17/01 3.44 05/18/01 3.76 08/24/01 3.45 05/25/01 3.78 08/31/01 3.44 06/01/01 3.70 09/07/01 3.43 06/08/01 3.64 09/14/01 2.95 06/15/01 3.59 09/21/01 2.60 06/22/01 3.46 09/28/01 2.49 06/29/01 3.60 10/05/01 2.40 07/06/01 3.70 10/12/01 2.39 07/13/01 3.62 10/19/01 2.37 07/20/01 3.60 10/26/01 2.31
The terrorist events of September 11, 2001 disrupted the reporting of interest rate data. As originally published, this rate was 3.02%. However, on October 1, 2001, the Federal Reserve revised the rate to 2.95%.
The method approved by the Ford court would average these 28 weekly rates to arrive at a blended interest rate for this period of 3.35%. As did the court in Ford, this Court will round that number to 4%.
As of the week ending September 7, 2001, the blended interest rate was 3.63%. Had that rate continued for the next seven weeks, the blended interest rate at the end of the 28 weeks would have been 3.63%. Given that, in the 21 weeks prior to 9/11, the rate had never dropped as low as 3.40%, even if 9/11 never happened and the interest rate had dropped to 3.40% and stayed there for the next seven weeks, the final blended interest rate would have been 3.58%. If 9/11 never happened and the interest rated dropped to 3.50%, the final blended interest rate would have been 3.60%. Therefore, rounding up rather than down seems appropriate given the unusual effect on interest rates the events of 9/11 had.
Therefore, the Court grants pre-judgment interest at a rate of 4% on the past-due STD benefits of $9,476.00.
Further, the Court grants post-judgment interest from the date of the Judgment Entry until the date the past-due benefits are paid at whatever is the most recent rate in effect on the date of payment.
IV. SUMMARY
The Court will enter judgment in favor of the plaintiff and against the two defendants jointly and severally as follows:
(1) Past-due short-term disability benefits in the amount of $9,476.00, plus interest at 4% (i.e., $379.04), for a total of $9855.04;
(2) Attorney fees in the amount of $54,950.00;
(3) Costs in the amount of $451.65; and
(4) Post-judgment interest on the past-due short-term disability amount of $9,476.00 from the date of the Judgment Entry until the date of payment as computed according to law.
Further, plaintiff shall have leave to submit an application for long-term disability benefits, provided the application is submitted by no later than May 22, 2006.
IT IS SO ORDERED.