Opinion
Civil Action No. 3:01-CV-0455-P
February 22, 2002
MEMORANDUM OPINION AND ORDER
Now before the Court are the following:
1. Plaintiff's Motion for Summary Judgment, filed June 7, 2001;
2. Defendants' Response to Plaintiff's Motion for Summary Judgment, with brief in support, filed June 27, 2001;
3. Plaintiff's Reply to Defendants' Response to Motion for Summary Judgment, filed July 12, 2001;
4. Plaintiff's Motion for Reconsideration of Order of Dismissal, filed June 25, 2001;
5. Defendant's Response to Plaintiff's Motion for Reconsideration of Order of Dismissal, filed June 27, 2001;
6. Plaintiff's Reply to Defendants' Response to Motion for Reconsideration of Order of Dismissal, filed July 12, 2001;
7. Defendants' Motion to Strike Portions of Plaintiff's "Reply," filed July 17, 2001;
8. Plaintiff's Reply to Defendants' Motion to Strike Portions of Plaintiff's Reply, filed August 6, 2001; and
9. Defendants' Reply to Plaintiff's Response to Defendants' Motion to Strike Portions of Plaintiff's "Reply," filed August 20, 2001.
In his Reply, Plaintiff withdrew his Motion for Reconsideration in light of Defendants' admission that Plaintiff's claim for attorneys' fees was not lost as a result of this Court's 30-day Order of Dismissal dated June 20, 2001.
After full consideration of the evidence, the parties' briefs and the applicable law, for the reasons set forth below, the Court DENIES Plaintiff's Motion for Summary Judgment requesting attorneys' fees and DENIES as MOOT Defendants' Motion to Strike.
BACKGROUND
On March 8, 2001, Plaintiff Joseph Schmidt, individually and as next friend of Phillip Schmidt ("Phillip"), brought suit against Defendants CIGNA HealthCare of Texas, Inc., d/b/a Healthsource; CIGNA Behavioral Health, Inc. (f/k/a MCC Behavioral Care, Inc.); International Rehabilitation Associates, Inc.; CIGNA Behavioral Health of Texas; and Connecticut General Life Insurance Corporation (collectively, "CIGNA"), seeking a Temporary Restraining Order ("TRO") and a Temporary Injunction to prevent the denial of payments and/or the pre-certification of benefits with respect to the continued inpatient stay of his 15-year old son Phillip at the Sundown Ranch. See Pl.'s Orig. Compl. at 1-2, 9.
In his Complaint, Plaintiff had alleged that his son Phillip, beginning on or about September of 2000, began exhibiting serious signs of anger and depression, which led to various episodes of threatened violence against himself and the Plaintiff. See Orig. Compl. at 2-3. Later, around Thanksgiving of that year, Schmidt claims he eventually took his son to the Timberlawn Mental Health System for an evaluation, which allegedly showed definite signs of bipolar disorder in addition to substance abuse problems. Id. at 3. That is when Plaintiff claims he began calling CIGNA's 1-800 behavioral health hot line number for a list of counseling services and doctors, only to be recommended to health care providers no longer participating in CIGNA. Id.
Thereafter, sometime around Christmas, Plaintiff alleges that Phillip's condition worsened as he openly began using drugs, ran away from home, and was arrested by the police. Id. CIGNA subsequently referred Plaintiff to Sundown Ranch, Inc., which accepted Phillip as an emergency admittance on January 26, 2001. Id.
CIGNA covered the costs of treatment for Phillip from January 26 until February 6, 2001, when Sundown Ranch informed Mr. Schmidt that CIGNA was refusing to authorize additional inpatient days. Id. at 4. Plaintiff claims that he requested additional reviews of CIGNA's decision, and participated in a CIGNA panel review of Phillip's case on or about February 20, 2001. Id. In addition, Schmidt claims that the only written communication he received from Defendants was a letter dated March 5, 2001, wherein Rick Pipkin, the Clinical Administrator at CIGNA Behavioral Health, stated that CIGNA was refusing to pay for Phillip's continued treatment at Sundown because "he no longer met criteria for mental health inpatient care" as per CIGNA's guidelines. Id. Moreover, Schmidt disputes the fact that he ever received an initial letter of denial from the Defendants' dated February 14, 2001. Id.
Meanwhile, CIGNA states that under the terms of the Compass Group USA medical benefits plan at issue here, Phillip was limited to thirty days per year for inpatient drug abuse treatment, thirty days per year of inpatient mental health treatment, sixty days per year of outpatient drug abuse treatment and thirty days per year of outpatient mental health treatment. See Br. Supp. Resp. Pl.'s Mot. Summ. J. ("Defs.' Resp.") at 5. As such, Defendants' position was that because Sundown Ranch was an "inpatient/residential treatment center for chemically dependent adolescents and young adults," it was not licensed to provide "medical or psychiatric treatment." Id. at 5-6. Also, because there was evidence that Phillip was admitted to Sundown Ranch "for severe alcohol and drug dependency," and not for any medical or psychiatric treatment, CIGNA believed that his inpatient treatment was subject to termination under the Compass plan. Id.
The Court granted Plaintiff's request for a TRO on March 8, 2001, and further ordered that Defendants appear and show cause as to why the TRO should not be made a temporary injunction on March 22, 2001. See Order dated 3/8/2001. Thereafter, on or about March 23, 2001, the parties entered into a confidential settlement agreement which mooted the need for a temporary injunction and settled the issues raised by Plaintiff's lawsuit. Pl.'s Mot. Summ. J. at 2.
On June 7, 2001 Schmidt then filed his Motion for Summary Judgment, seeking an award of attorneys' fees in the amount of $20,649.45 pursuant to 29 U.S.C. § 1132 (g). Id. Defendants' position, however, is that Plaintiff's Motion must be denied in the absence of any authority for the proposition that attorneys' fees may be awarded in an ERISA case that has been settled without an adjudication of the merits. Defs.' Resp. at 2. Moreover, CIGNA believes Schmidt's claim for attorneys' fees should also be denied because it fails on the merits. Id. These issues shall be addressed as follows.
DISCUSSION
Under the Employee Retirement Income Security Act ("ERISA"), "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) (2001). Such an award, as the statute states, is purely discretionary. Todd v. AIG Life Ins. Co., 47 F.3d 1448, 1459 (5th Cir. 1995). In exercising this discretion, the Fifth Circuit requires that the court consider the following five factors: (1) the degree of the opposing parties' culpability or bad faith; (2) the ability of the opposing parties to satisfy an award of attorneys' fees; (3) whether an award of attorneys' fees against the opposing parties would deter other persons acting under similar circumstances; (4) whether the parties requesting attorneys' fees sought to benefit all participants and beneficiaries of an ERISA plan or sought resolution of a significant legal question regarding ERISA; and (5) the relative merits of the parties' positions. Iron Workers Local No. 272 v. Bowen, 624 F.2d 1255, 1266 (5th Cir. 1980); see also Harms v. Cavenham Forest Industries, Inc., 984 F.2d 686, 694 (5th Cir. 1993).
While no one of these factors is necessarily decisive, and some may not even be apropos in a given case, together they are the nuclei of concerns that the court should address. Bowen, 624 F.2d 1266. Moreover, this list of five factors is a non-exhaustive, ejusdem generis list. Riley v. Adm'r of the Supersaver 401K Capital Accumulation Plan for Employees of Participating AMR Corp. Subsidiaries, 209 F.3d 780, 782 (5th Cir. 2000). Meaning that, in any individual case, other considerations may be relevant as well. Id. Finally, while other circuits have asserted that a presumption exists under ERISA in favor of awarding costs and attorneys' fees, that is not the law in the Fifth Circuit. Harms, 984 F.2d at 694.
In this case, as two other sister district courts have already found, there are no precedents within the Fifth Circuit authorizing the Court to award attorneys' fees in connection with a private settlement of an ERISA claim. See Johnson v. Harvey, No. CIV. A. 96-3438, 1998 WL 781590 at *2 (E.D. La. Nov. 10, 1998) (Vance, J.); see also Martin v. Metropolitan Life Ins. Co., No. CIV. A. 3:98-CV-0848-D, 2000 WL 554199 at *2-3 (N.D. Tex. May 4, 2000) (Fitzwater, J.). Nevertheless, the Court shall consider all relevant Bowen and non-Bowen factors, without giving predominance or preclusive effect to any one of them, in determining whether to award Plaintiff's request for attorneys' fees under 29 U.S.C. § 1132 (g). See Riley, 209 F.3d at 782 (dicta) (holding that the court must consider all the Bowen factors and relevant non-Bowen factors when considering a request for attorneys' fees under ERISA).
a. Degree of Opposing Parties' Culpability or Bad Faith.
There is nothing in the record that indicates that the CIGNA acted in bad faith in initially denying Plaintiff's requests for inpatient services to Phillip at the Sundown Ranch. Rather, the evidence before the Court indicates that CIGNA based its decision on the medical opinions and information available to it when deciding that Plaintiff's son no longer met the specified criteria for mental health inpatient care per CIGNA's Behavioral Health Clinical Guidelines. See Defs.' Resp. at 20. Moreover, the evidence indicates that Defendants' were acting reasonably then they stated that the Sundown Ranch was not an appropriate facility for the continued treatment of Phillip since Dorothy Ward, the Nursing Director at Sundown, acknowledged that Phillip was initially admitted on January 26, 2001 only for severe alcohol and drug dependency, and not for mental health reasons. See Pl.'s Compl., Exh. 2 (Ward Aff. at 1-2).
More specifically, Defendants assert reliance upon the opinions of Anthony E. Ferrante, M.D., I.M. Greenberg, M.D., Paul Manshein, M.D., and Ronald J. Wauters, M.D. in CIGNA Behavioral Health and CIGNA Healtheare's decision to deny coverage to Plaintiff's dependent. See Defs.' Resp. at 20-21 (internal citations omitted).
Under the applicable standard of review, the Court may only consider the evidence that was available to the plan administrator in evaluating whether he abused his discretion in making the factual determinations underlying the denial of coverage. See Southern Farm Bureau Life Ins. v. Moore, 993 F.2d 98, 102 (5th Cir. 1993). Since the Court finds that CIGNA's decision to initially deny coverage was not an abuse of discretion, this factor weighs in favor of the Defendants.
b. The Ability of the Opposing Parties to Satisfy an Award of Attorneys' Fees.
Plaintiff here asserts that CIGNA has the financial capability to satisfy an award of attorneys' fees. Pl.'s Mot. Summ. J. at 7. More specifically, Schmidt cites evidence from the CIGNA Corporation's (parent company) website estimating $95.1 billion in assets, $5.4 billion in shareholders' equity, and year 2000 revenues from continuing operations totaling $20 billion. Id. Defendants Response does not dispute these figures, but is limited simply to arguing that Schmidt has failed to explain what "consolidated assets," "shareholders' equity," or "2000 revenues from continuing operations" mean in the context of its financial ability. See Defs.' Resp. at 24. Therefore, the Court finds that this second factor weighs in favor of awarding such fees and costs to Plaintiff.
c. Whether an Award of Attorneys' Fees Against the Opposing Parties Would Deter Other Persons Acting Under the Same or Similar Circumstances.
Plaintiff claims that, in light of the assets and revenues of the CIGNA Corporation, an award of the amount of attorneys' fees in this matter may not serve as much of a deterrent in and of itself. Pl.'s Mot. Summ. J. at 7. However, Schmidt states that the cumulative effect of such an award in this case and in similar cases in which CIGNA may seek to wrongfully deny benefits, at a minimum, might serve as an incentive in the future for Defendants to consider all of the facts before making medical decisions. See Id.
This third factor under Bowen is intimately related to the bad faith factor previously discussed above. Other courts have found that when there is no finding of bad faith or culpability, such as the case here, this factor becomes irrelevant since there is no behavior that the court seeks to deter. See Martin, 2000 WL 554199 at *3 ( citing Johnson, 1998 WL 781590 at *2).
Plaintiff maintains that CIGNA refused to discuss its reasons for denying coverage, and thus he was forced to file suit and ultimately secured the coverage he had sought. The Court acknowledges that this is true. However, whether coverage existed for continued treatment at Sundown Ranch was a close question. Defendant had support for its decision to initially deny continued coverage for Phillip inpatient services based on the advise of its medical experts and on the terms of the policy itself. Because of the closeness of the issues involved and CIGNA's lack of bad faith, the Court finds that the deterrent purpose of the third factor, on balance, does not weigh either in favor or against allowing attorneys' fees. Furthermore, since this case was settled and therefore no adjudication on the merits has taken place, there has been no determination of a proscribed specific conduct that should now be deterred in the future. Thus, the Court finds that the deterrent purpose that this third Bowen factor purports to serve is inapplicable to this analysis. See Harms, 984 F.2d at 694 n. 12.
d. Whether the Party Requesting Attorneys' Fees Seeks to Benefit All Participants and Beneficiaries of an ERISA Plan or to Resolve a Significant Legal Issue Regarding ERISA Itself.
In this case, Schmidt has failed to point out any benefit that would accrue to the participants and beneficiaries of the Compass plan if the Court were to grant Plaintiff's request for attorneys' fees. In fact, Plaintiff's original complaint only sought to prevent CIGNA from terminating coverage with respect to Phillip's inpatient stay at the Sundown Ranch. See Orig. Compl. at 16. As such, the Court is persuaded in finding that Schmidt sought to benefit only himself rather than all ERISA participants or beneficiaries. See Harms, 984 F.2d at 694.
Moreover, Schmidt has also failed to identify in his Motion the existence of any significant legal issues that his case has presented or that have been resolved following its settlement. Thus, the Court concludes that this factor weighs against an award of fees and costs here.
e. The Relative Merits of the Parties' Positions
Although Plaintiff does not directly address this factor in his Motion, his position is that since he received in settlement what he sought to obtain through the filing of this lawsuit (i.e., inpatient stay for Phillip), his position clearly had greater merit because CIGNA would not have otherwise settled. See Pl.'s Reply to Defs.' Resp. at 11. Nevertheless, regardless of the reasons behind the parties' settlement here, there is no simply evidence to suggest that CIGNA's position was so weak so as to justify an award of fees against it. See Martin, 2000 WL 554199 at *3 (internal citations omitted). Since there was no adjudication on the merits, the Court is reluctant to find Plaintiff's position more meritorious than that of the Defendants. As such this factor does not weigh in favor of a fee award.
f. Other Relevant Factors
The Court concludes that there are no additional factors that affect its assessment of Plaintiff's entitlement to attorneys' fees in this case.
In sum, the Court finds in this case that Defendants did not act in bad faith when they based their denial of coverage on equally meritorious arguments than those of the Plaintiff. And although it is possible that CIGNA may be able afford paying Schmidt's expended attorneys' fees, requiring it to do so would have no desired deterrent effect. Moreover, Plaintiff did not seek to benefit all the participants or beneficiaries of the Compass plan when filing his lawsuit, nor did the settlement of his ERISA claim resolve any significant legal questions here. Having assessed the relevant Bowen and non- Bowen factors in the aggregate, the Court finds that attorneys' fees need not be awarded to Plaintiff in this case.
CONCLUSION
Accordingly, Plaintiffs' Motion for Summary Judgment requesting attorneys' fees is shall be and is hereby DENIED. Further, the Court DENIES as MOOT Defendants' Motion to Strike portions of Plaintiff's Reply.
IT IS SO ORDERED.