Opinion
No. 3-00-CV-2809-H
May 23, 2002
FINDINGS AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE
Defendant Aetna Life Insurance Company ("Aetna") has filed an application for attorney's fees and costs as the prevailing party in this ERISA case. For the reasons stated herein, Aetna should be awarded $234.60 in taxable court costs but no attorney's fees.
This case was assigned to U.S. Magistrate Judge Jane J. Boyle with the consent of the parties pursuant to 28 U.S.C. § 636 (c). By order dated April 19, 2002, the case was reassigned to U.S. Magistrate Judge Jeff Kaplan after Judge Boyle resigned to become the United States Attorney for the Northern District of Texas. See MISC. ORDER 3-204, Attch. A (Apr. 19, 2002). Since the parties have not consented to Judge Kaplan, the case has been transferred to U.S. District Judge Barefoot Sanders. See ORDER, 5/23/02. The magistrate judge will make findings and recommendations on Aetna's application for attorney's fees and costs pursuant to 28 U.S.C. § 636 (b)(1)(B) and Rule 54(d)(2)(D) of the Federal Rules of Civil Procedure.
I.
Plaintiff Mattie Richardson was a participant in an employee welfare benefit plan established and maintained by the TI Employees Health Benefit Trust ("Plan"). One of the benefits offered by the Plan was a long-term disability insurance policy issued by Aetna. Under the policy, a disabled employee is entitled to receive a monthly benefit of 50% of her monthly basic earnings, less "other income benefits," but in no event less than $100 per month. "Other income benefits" is defined by the policy to include state workers' compensation benefits, Social Security Disability Income ("SSDI"), and earnings from part-time employment or from a qualified rehabilitation program. The policy further provides that, in the event of overpayment due to the receipt of unreported "other income benefits" or retroactive SSDI benefits, Aetna is entitled to suspend the payment of benefits until the overpayment is recovered. Participants are also required to sign a Reimbursement Agreement to that effect.On February 12, 1995, plaintiff began receiving $753.86 per month under the policy as a result of a covered disability. Aetna subsequently learned that plaintiff had received $4,098.51 in workers' compensation benefits, SSDI, and rehabilitation earnings from February 12, 1995 through September 30, 1996. Thereafter, Aetna withheld disability benefits until the overpayment was recovered. This prompted plaintiff to sue Aetna in state district court for breach of contract, breach of the duty of good faith and fair dealing, and violations of the Texas Insurance Code. Aetna removed the case to federal court and moved for summary judgment as to all claims and causes of action. In a Memorandum Opinion and Order dated December 26, 2001, the Court ruled that plaintiff's state law claims were preempted by ERISA and that Aetna properly withheld $4,098.51 to recover overpayments due to the receipt of "other income benefits." The Court wrote:
At the time she applied for disability benefits, plaintiff was earning $1,507.71 per month.
It is clear from these records that Aetna calculated Richardson's benefits in accordance with the terms of the Plan. As noted above, Richardson's scheduled monthly benefit under the Plan is $753.86 per month . . . To determine the amount of Richardson's monthly benefit payable, Aetna deducts her "other income benefits" from her scheduled monthly benefit. Richardson does not dispute that Aetna is entitled to do so under the Plan. Rather, Richardson complains about the amount Aetna has deducted. According to Richardson, Aetna deducted amounts for workers' compensation income benefits in 1995 and 1996 that she never received. Richardson, however, fails to point to any competent summary judgment evidence to support her contention. Although Richardson attaches two pages of "draft inquiries" to her summary judgment response, she has not authenticated such documents and does not explain what they are, where they came from, or how they show that she "was not receiving workers' compensation benefits in 1995 and 1996 equivalent to the credits which Aetna calculated." . . . Because Richardson points to nothing else in the record to support her claim for additional benefits, the Court finds that the claim fails and that summary judgment is proper.
Richardson v. Aetna Life Insurance Co., 2001 WL 1661699 at *6 (N.D. Tex. Dec. 26, 2001) (emphasis in original).
Aetna now seeks $7,576 in attorney's fees and $234.60 in costs as the prevailing party in this litigation. The parties have briefed the issues and this matter is ripe for determination.
II.
Under the ERISA statute, "the court in its discretion may allow a reasonable attorney's fee and costs of action to either party." 29 U.S.C. § 1132 (g)(1). Five factors are relevant to the determination whether to award fees and costs: (1) the degree of the opposing party's culpability or bad faith; (2) the ability of the opposing party to satisfy a fee award; (3) whether an award would deter future conduct by other persons acting under similar circumstances; (4) whether the party seeking the award sought to benefit all participants in an ERISA plan or to resolve a significant legal question under ERISA; and (5) the relative merits of the parties' positions. See Pitts v. American Security Life Insurance Co., 931 F.2d 351, 358 (5th Cir. 1991), citing Iron Workers Local No. 272 v. Bowen, 624 F.2d 1255, 1266 (5th Cir. 1980). No single factor is determinative, and the court may consider any other factors that are relevant in a particular case. Riley v. Administrator of the Supersaver 401K Capital Accumulation Plan for Employees of Participating AMR Corp. Subsidiaries, 209 F.3d 780, 782-83 (5th Cir. 2000).
A.
The first factor assesses the degree of the opposing party's culpability or bad faith. "A party's conduct may rise to the level of bad faith for egregious conduct, such as the pursuit of frivolous claims or breach of fiduciary duty." UNUM Life Insurance Co. of America v. Brandon, 2000 WL 175363 at * 2 (N.D. Tex. Feb. 14, 2000), citing Freedman v. Texaco Marine Services, Inc., 882 F. Supp. 580, 584-85 (E.D. Tex. 1995). Culpable conduct that does not rise to the level of bad faith may also weigh in favor of awarding fees. See, e.g. Dial v. NFL Players Supplemental Disability Plan, 174 F.3d 606, 614 (5th Cir. 1999) (although defendant did not act in bad faith, "[defendant] is clearly responsible for its erroneous interpretation that was in direct conflict with the plain meaning of the settlement agreement"); Wegner v. Standard Insurance Co., 129 F.3d 814, 821 (5th Cir. 1997) (affirming district court's holding that, although not bad faith, defendant's frivolous justification weighed in favor of awarding attorney's fees); Brandon, 2000 WL 175363 at *3 (finding that participant's defenses, while not frivolous or pursued in bad faith, were baseless and thus weighed in favor of awarding fees).
Aetna accuses plaintiff of acting in bad faith "by continuing to pursue a completely groundless claim against Aetna when the lack of merits of [her] claims had been explained time and again to plaintiff and her counsel." (Aetna Mot. at 3, ¶ 5). The Court disagrees. Plaintiff never disputed that Aetna had the right to deduct overpayments from her monthly disability benefits. Rather, plaintiff argued that she "was not receiving workers' compensation income benefits in 1995 and 1996 equivalent to the credits which Aetna calculated." (See Plf. Resp. to MSJ at 2 Exh. 1). Cf. Brandon, 2000 WL 175363 at *2 (rejecting as "baseless" argument that insurance company was not entitled to recover any overpayments because plaintiff had not been "made whole" by receipt of disability benefits). The Court ultimately ruled in favor of Aetna on this issue because plaintiff's attorney had not properly authenticated the documents attached to her summary judgment response. See Richardson, 2001 WL 1661699 at *6. This deficiency is indicative of sloppy lawyering, not bad faith. Accordingly, this factor weighs against awarding attorney's fees.
Aetna also sought sanctions against plaintiff's counsel under Rule 11 of the Federal Rules of Civil Procedure. In denying the motion, the Court noted that "Aetna has failed to meet its burden in establishing that [counsel] violated Rule 11(b)(2) or (3) by presenting to the Court a pleading or other paper without a reasonable belief that there was some evidentiary support for the factual contentions in support of plaintiff's claims or a reasonable belief that the legal claims for relief were warranted by existing law." ORDER, 12/17/01.
B.
Next, the Court looks to the opposing party's ability to pay fees. The record shows that plaintiff receives $900 per month in SSDI and $100 per month in disability benefits. (See Def. MSJ App. at 6 n. 1). Clearly, a person with a monthly income of $1,000, with no savings or other assets lacks the financial resources to pay $7,576 in attorney's fees. This factor militates against such an award.
C.
The third factor considers whether awarding attorney's fees would deter future conduct by other persons acting under similar circumstances. Without a finding of bad faith, this factor carries little force because there is no behavior that the court seeks to deter. See Brandon, 2000 WL 175363 at *3; Hixson v. Liberty Corp., 964 F. Supp. 218, 227 (W.D. La. 1997) ("Because this court does not find bad faith on the part of the defendant, an award of fees would not serve to deter future negative conduct.").
D.
Nor did this case resolve any significant legal question under ERISA or benefit all Plan participants. This was simply a dispute between plaintiff and her insurance company regarding the amount of benefits due under her long-term disability policy. As such, this factor weighs against awarding attorney's fees. See Brandon, 2000 WL 175363 at *3.
E.
Finally, the Court must consider the relative merits of the parties' positions. Once again, the Court cannot say that plaintiff's claims were groundless. See Izzarelli v. Rexene Products Co., 24 F.3d 1506, 1526 (5th Cir. 1994) (when opposing party's claim is not groundless, fifth factor does not support an award of fees). It appears that the failure to properly authenticate summary judgment evidence, rather than lack of merit, may have been the most significant factor in the ultimate outcome of this case.
Plaintiff also suggests that her psychiatric condition may have contributed to her persistence in this lawsuit. (Plf. Resp. at 1). In support of this assertion, plaintiff relies on a letter from her treating psychiatrist, Kristen Grable, M.D. (Id., Exh. 1). However, this letter, like her summary judgment evidence, is not properly authenticated and will not be considered by the Court.
The Court concludes that none of the relevant factors weigh in favor of awarding attorney's fees under 29 U.S.C. § 1132 (g)(1). Accordingly, Aetna's fee application should be denied.
III.
Alternatively, Aetna seeks costs pursuant to Rule 54(d) of the Federal Rules of Civil Procedure. A prevailing party is entitled to recover its costs "unless the court otherwise directs." FED. R. Civ. P. 54(d). Taxable costs include: (1) fees paid to the clerk and marshal; (2) court reporter fees for all or part of a deposition transcript; (3) witness fees and related expenses; (4) printing costs; and (5) fees for copies of papers necessarily obtained for use in the case. See 28 U.S.C. § 1821 1920. A district court may decline to award statutory costs, but may not award costs omitted from the statute. Crawford Fitting Co. v. J.T. Gibbons, Inc., 482 U.S. 437, 441-41, 107 S.Ct. 2494, 2497, 96 L.Ed.2d 385 (1987); Coats v. Penrod Drilling Corp., 5 F.3d 877, 891 (5th Cir. 1993), cert. denied, 114 S.Ct. 1303 (1994).
The inability to pay costs may be considered in determining whether to grant or deny such an award. See McGill v. Faulkner, 18 F.3d 456, 459 (7th Cir.), cert. denied, 115 S.Ct. 233 (1994). However, even indigent litigants are not automatically exempted from paying costs. Id. at 458; Weaver v. Toombs, 948 F.2d 1004, 1008 (6th Cir. 1991). Here, Aetna seeks $150 in filing fees and $84.60 in photocopy expenses, for a total of $234.60. (See Aetna Mot., Shely Aff. at 2-3, ¶ 7). Plaintiff has failed to present any evidence or argument as to why she cannot pay these costs, even on a fixed income of $1,000 per month. Accordingly, Aetna should recover taxable court costs in the amount of $234.60.
RECOMMENDATION
Aetna's application for attorney's fees and costs should be granted in part and denied in part. The Court should decline to award attorney's fees under the ERISA statute, 29 U.S.C. § 1132 (g)(1). However, Aetna should recover taxable court costs in the $234.60 pursuant to Rule 54(d) of the Federal Rules of Civil Procedure.
SO ORDERED.