Schadler v. Anthem Life Insurance Company

Full title: ANITA SCHADLER, Plaintiff, v. ANTHEM LIFE INSURANCE COMPANY, et al.…

Court: United States District Court, N.D. Texas, Dallas Division

Date published: Feb 3, 2000

Case No. 3:95-CV-1044-D (N.D. Tex. Feb. 3, 2000)

Opinion

Case No. 3:95-CV-1044-D

Filed February 3, 2000

MEMORANDUM OPINION AND ORDER

SIDNEY A. FITZWATER, United States District Judge.

Following a decision awarding her benefits under an ERISA-governed¹ voluntary accidental death and dismemberment policy ("VADD policy"), see Schadler v. Anthem Life Ins. Co., 1999 WL 1044486 (N.D. Tex. Nov. 18, 1999) (" Schadler II"), plaintiff Anita Schadler ("Mrs. Schadler") moves for an award of attorney's fees and costs. Having considered the relevant factors, the court denies the motion for the reasons that follow.²

1 Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001-1461.

2 The court sets out in this memorandum opinion and order its findings of fact and conclusions of law. See Fed.R.Civ.P. 52 (a).

I

The pertinent background facts and extensive procedural history of this case are set out in Schadler II, 1999 WL 1044486, at *1-*3. The court adopts, and assumes the parties' familiarity with, that part of Schadler II for purposes of deciding Mrs. Schadler's motion for attorney's fees and costs. The court also assumes the parties' familiarity with the court's reasoning in Schadler II for holding that the Administrator abused his discretion in denying Mrs. Schadler's claim for benefits under the VADD policy. Id at *6-*10.

II

In most ERISA actions by a plan beneficiary, the court in its discretion may allow reasonable attorney's fees and costs to either party. See 29 U.S.C. § 1132 (g)(1); Bellaire General Hosp. v. Blue Cross Blue Shield of Mich., 97 F.3d 822, 832 (5th Cir. 1996). In exercising this discretion, the court must perform a two-part analysis. First, the court determines whether the party is entitled to an award of attorney's fees in light of the relevant factors. Second, if the party is so entitled, the court calculates the proper amount of the fee award. Todd v. AIG Life Ins. Co., 47 F.3d 1448, 1459 (5^th Cir. 1995).

The court determines whether a party is entitled to attorney's fees by weighing five factors: (1) the degree of the opposing party's culpability or bad faith; (2) the ability of the opposing party to pay the fees; (3) whether an award of attorney's fees would deter other persons who will be acting under similar circumstances; (4) whether the party seeking attorney's fees sought to benefit all ERISA participants or beneficiaries or to resolve a significant legal issue; and (5) the relative merits of the parties' positions. Pitts v. American Sec. Life Ins. Co., 931 F.2d 351, 358 (5^th Cir. 1991); Iron Workers Local #272 v. Bowen, 624 F.2d 1255, 1266 (5^th Cir. 1980). No single factor is necessarily decisive, and some factors may be inapplicable to a specific case, "but together they are the nuclei of concerns that a court should address in applying" ERISA. Wegner v. Standard Ins. Co., 129 F.3d 814, 821 (5^th Cir. 1997) (quoting Iron Workers, 624 F.2d at 1266).

III A

The court first considers 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. See, e.g., Freedman v. Texaco Marine Servs., Inc., 882 F. Supp. 580, 584-585 (E.D. Tex. 1995) (holding that defendant's "indefensible" interpretation of plan could possibly constitute bad faith); Wright v. Nimmons, 641 F. Supp. 1391, 1408 (S.D. Tex. 1986) (stating that defendant who breached fiduciary duty acted in bad faith). A party may still be culpable for conduct that does not rise to the level of bad faith. See, e.g., Dial v. NFL Player Supp. Disability Plan, 174 F.3d 606, 614 (5^th Cir. 1999) ("[A]lthough the Court stops short of accusing [defendant] of acting 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, 129 F.3d at 821 (affirming district court's holding that, although not bad faith, defendant's frivolous justification weighed in favor of awarding attorney's fees); Texas Commerce Bancshares v. Barnes, 798 F. Supp. 1286, 1289 (W.D. Tex. 1992) (finding that "though not necessarily bad faith," defendants' culpability for actions was significant).

Following a bench trial, the court ruled in Schadler v. Anthem Life Ins. Co., 1997 WL 181538 (N.D. Tex. 1997) (" Schadler"), vacated, 147 F.3d 388 (5^th Cir. 1998), in favor of defendants concerning the optional life insurance policy ("Optional Life Policy"). Id. at *5 Mrs. Schadler did not challenge this ruling on appeal. See Schadler v. Anthem Life Ins. Co., 147 F.3d 388, 391 n. 2 (5^th Cir. 1998) (" Schadler)"). Defendants could not have acted in bad faith, or with sufficient culpability to warrant an award of attorney's fees and costs, in denying Mrs. Schadler's claim for the proceeds of the Optional Life Policy.

In Schadler the court also ruled in defendants' favor concerning the VADD Policy. The Fifth Circuit reversed in Schadler I because this court improperly applied a de novo standard of review, not because the Administrator's decision was wrong or an abuse of discretion. See Schadler I, 147 F.3d at 398. Following remand and further consideration by the Administrator, the court ruled in Schadler II that the Administrator had abused his discretion in denying Mrs. Schadler's claim under the VADD Policy. It is apparent from the court's reasoning in Schadler II that defendants did not act in bad faith or with a degree of culpability sufficient to warrant awarding attorney's fees and costs against them. For example, in harmonizing its ruling in Schadler II with its decision in Schadler, the court noted that "the administrative record as it is now compiled contains evidence that is more favorable to Mrs. Schadler, including the affidavits of Dr. Munden, McCravey, and Mrs. Schadler[.]" Schadler II, 1999 WI, 1044486, at *10. The affidavits to which the court referred were Mrs. Schadler's May 7, 1999 affidavit, a May 6, 1999 affidavit of Herbert C. Munden, Jr., M.D., and a May 6, 1999 affidavit of David McCravey. These documents were not made available to the Administrator until years after Mrs. Schadler filed suit.

Defendants' position in the litigation was not groundless — the court ruled initially in their favor — and the court is not persuaded that defendants acted in bad faith. See Ramsey v. Colonial Life Ins. Co., 12 F.3d 472, 480 (5^th Cir. 1994) (affirming district court's ruling that defendant did not act in bad faith where denial of coverage was based on genuine legal issues); Harms v. Cavenham Forest Indus., Inc., 1993 WL 262699, at *1 (E.D. La. July 6, 1993) (fact that defendants argued different interpretations of plans did not lead to conclusion that defendants acted in bad faith). The court holds that the first factor weighs against awarding attorney's fees and costs to Mrs. Schadler.

B

The second factor takes into account the ability of the opposing party to pay the fees. Defendants do not contest their ability to pay attorney's fees and costs. The second factor weighs in favor of awarding such fees and costs to Mrs. Schadler,

C

The third factor addresses whether an award of attorney's fees would deter other persons who will be acting under similar circumstances. This factor is related to the bad faith component.

Where there is no finding of bad faith or culpability, this factor carries less force because there is no behavior that the court seeks to deter. See Johnson v. Harvey, 1998 WL 781590, at *2 (ED. La. Nov. 10, 1998) (factor not a significant concern where there has been no adjudication proscribing conduct to be deterred in the future); 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."); Boggs v. Boggs, 1997 WL 627599, at *1 (E.D. La. Oct. 10, 1997) (deterrence factor related to bad faith factor). Because the court has already concluded that defendants were neither sufficiently culpable nor acted in bad faith, it follows that they did not engage in conduct concerning which an award of fees and costs is necessary for deterrence.

D

Under the fourth factor, the court assesses whether the party seeking attorney's fees sought to benefit all ERISA participants or beneficiaries or to resolve a significant legal issue. In asserting her claims, Mrs. Schadler sought to recover benefits that she was owed as the policy beneficiary. Her purpose in litigating this case was to benefit herself rather than all ERISA participants or beneficiaries. See Harms v. Cavenham Forest Indus., Inc., 984 F.2d 686, 694 (5^th Cir. 1993). The case did not resolve any significant legal issues. In her discussion of the Johnson ³ factors, Mrs. Schadler identifies as a significant legal issue the extent of deference that courts should afford plan administrators. See P. Br. at 5. This ground is insufficient for two reasons. First, this court did not decide that question; the Fifth Circuit did in Vega v. National Live Ins. Servs., Inc., 188 F.3d 287 (5^th Cir. 1999) (en banc). Second, this court did not have to apply the Vega sliding scale in deciding Mrs. Schadler's claims. See Schadler II, 1999 WL 1044486, at *4 (holding that because "the court would reach the same result in this case even if the Administrator had no conflict, the court need not address precisely how it would apply the sliding scale" standard of Vega). She has not otherwise identified significant legal issues that she presented and that the court resolved in this case.

3 Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974).

E

Under the fifth factor, the court considers the relative merits of the parties' positions. Mrs. Schadler did not prevail on her claim under the Optional Life Policy. Regarding the VADD policy, Mrs. Schadler's position ultimately proved to have greater merit than did defendants', but not sufficiently so — especially in view of defendants' initial success and the late additions to the administrative record that assisted Mrs. Schadler — to warrant an award of attorney's fees and costs. See Sunbeam-Oster Co. Group Benefits Plan v. Whitehurst, 102 F.3d 1368, 1378 (5th Cir. 1996) (affirming denial of award where relative merits of parties' positions "not overwhelmingly stacked" on one side); Izzarelli v. Rexene Prods. Co., 24 F.3d 1506, 1526 (5^th Cir. 1994) (where party's claim not groundless, fifth factor does not support fee award); Pitts, 931 F.2d at 358 (affirming denial of fees where there was "some merit to each party's position"). The fifth factor weighs against an award of attorney's fees and costs.

There is no presumption in favor of awarding attorney's fees to a prevailing beneficiary in an action brought under ERISA. Harms, 984 F.2d at 694. Having assessed the factors in the aggregate as the nuclei of concerns that the court should address in applying ERISA, the court holds that Mrs. Schadler should not recover her attorney's fees and costs from defendants.

* * *

Accordingly, plaintiff's motion is denied.⁴ SO ORDERED.

4 In the court's November 18, 1999 judgment, it awarded Mrs. Schadler "attorney's fees in the amount that the court awards by separate judgment." Having considered her motion, the court has determined that she is not entitled to recover attorney's fees and costs.

February 3, 2000.