In ERISAland, attorneys’ fees are infrequently awarded to defendants for having to defend themselves in a matter involving a denial of disability benefits.  This week’s notable decision, Hackney v. Allmed Healthcare Management, Inc., No. 3:15-CV-00075-GFVT, 2018 WL 1981902 (E.D. Ky. Apr. 27, 2018), is one of those infrequent and disappointing cases where the court orders an unsuccessful plaintiff to pay the defendant five figures in attorneys’ fees and costs.  And all because the plaintiff pushed the envelope in pursuing a cause of action not generally recognized as available under ERISA.

Here, Plaintiff 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 determined that the state law claim, which can be construed as one for the improper denial of long-term disability benefits, was completely preempted by ERISA because Hackney could bring this claim 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, where he regrettably fared no better.  The Sixth Circuit, in an unpublished decision, found that the state-law claim against Allmed is completely preempted by ERISA because in essence it is about a denial of benefits under an ERISA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 subsequently sought an award of attorneys’ fees and costs against Hackney.  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 refused to address Hackney’s objection to any award of attorneys’ fees and costs.  This objection should have been addressed in a motion under Rule 60 to the court’s order granting Allmed attorneys’ fees.  

With respect to the other objections, the court made the following findings:  

  • 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.
  • 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.
  • 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 necessary.  Allmed succeeded in its opposition because the Supreme Court denied the petition.
  • 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.
  • 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.”  
  • Allmed can recover time relating to communications with Lincoln National.
  • Allmed is entitled to its sought-after costs even though costs labeled “copying” did not provide more detail.
  • 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.

Though there are some findings in here that would be helpful to a prevailing ERISA plaintiff seeking full payment of attorneys’ fees and costs, the ultimate outcome of this case is unfortunate.  In my view, a plaintiff who pushes the envelope in an attempt to expand the scope of remedies available should not be hit with a five-figure fee bill.  Third-party administrators like Allmed routinely provide “paper reviews” of disability claims that devastate the lives of claimants whose benefits are stopped in reliance on a doctor who never even evaluated them in person and who are immune from recourse for rendering a negligent opinion.  Their own attorneys’ fees are a cost that they can bear considering how much they profit from these reviews.  

I’ll get off my soapbox for the moment to say enjoy the rest of the case summaries!

Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.

Attorneys’ Fees

Sixth Circuit

Hackney v. Allmed Healthcare Management, Inc., No. 3:15-CV-00075-GFVT, 2018 WL 1981902 (E.D. Ky. Apr. 27, 2018) (Judge Gregory F. Van Tatenhove).  See Notable decision summary above.  

Breach of Fiduciary Duty

Ninth Circuit

Hart Interior Design LLC 401(k) Profit Sharing Plan v. Recorp Investments Inc., et al., No. CV-16-02347-PHX-GMS, 2018 WL 1961643 (D. Ariz. Apr. 26, 2018).  In this case where the Plan alleges that IMH Financial Corp. and Recorp Investments, Inc. breached their ERISA fiduciary duties by pursuing unmerited litigation against a property management company, and RII additionally breached its fiduciary duty by failing to provide material information to the Plan, the court denied Defendants’ motion for summary judgment concerning IMH’s and RII’s breach of fiduciary duties.  It determined that the Plan has shown a question of fact concerning the legitimacy of the debts and fees and a jury could conclude that IMH and RII breached their ERISA fiduciary duties to care for the Plan’s assets.  The court also determined that there is a question of fact whether RII met its obligation to convey complete and accurate information to the beneficiary’s circumstances and that the Plan’s expenditure to defend the lawsuits would be losses to the Plan resulting from a fiduciary breach.  

Ford v. Bonhomme-Cahn, No. 3:16-CV-00460-L-WVG, 2018 WL 1942270 (S.D. Cal. Apr. 25, 2018) (Judge M. James Lorenz).  In this case alleging “looting” of an ERISA plan by plan fiduciaries, the court determined that Plaintiffs may proceed on all of their claims.  It rejected Defendant’s argument that Plaintiffs lack Article III standing and that their claims are barred by a three year statute of limitations and a six year statute of repose.  The court granted Defendant’s motion for summary judgment as to Plaintiffs’ prayer for individual relief.  The recovery must go to the Plan or all Plan participants.  

Southwest Regional Council of Carpenters v. McCarron, No. 15-55879, __F.App’x__, 2018 WL 1903908 (9th Cir. Apr. 23, 2018) (Before: THOMAS, Chief Judge, and TROTT and SILVERMAN, Circuit Judges).  “The district court properly granted summary judgment as to liability on SWRCC’s claim of breach of fiduciary duty under LMRDA § 501(a) because McCarron violated SWRCC’s bylaws, and thus breached his fiduciary duties as a union officer as a matter of law, by making payments to the Southwest Carpenters Training Fund (“SWTF”) without first referring SWTF’s rental overpayment bills to SWRCC trustees for review.”  “As to the issue of damages caused by McCarron’s breach of his fiduciary duty to SWRCC, however, the district court clearly erred in effectively construing McCarron’s answers to SWRCC’s ambiguous requests for admissions as binding declarations that SWRCC owed no money to the SWTF when he paid SWTF $5,364,970.10 from SWRCC’s coffers.”  “The district court properly granted summary judgment on McCarron’s counterclaims for retaliation and violation of his free speech rights under LMRDA § 101(a)(2) because he made no showing that SWRCC took action against him after he expressed his opposition to union policies.”

Class Actions

Sixth Circuit

Durand v. Hanover Ins. Grp., Inc., No. 3:07-CV-00130-HBB, 2018 WL 1948098 (W.D. Ky. Apr. 25, 2018) (Judge H. Brent Brennenstuhl).  The court denied Plaintiffs’ motion for “reconsideration of the following: (1) the Court’s ‘sua sponte dismissal’ of claims 3, 4, and 5 for want of an adequate statement in the amended complaint; (2) the Court’s denial, based on its dismissal of the three claims, of Plaintiffs’ requested modifications to Subclass A’s definitions; (3) the Court’s consideration of only claims 1 and 2 in the Rule 26(b)(1) relevance assessment of the 199 documents that Plaintiffs asked to be reviewed in camera; and (4) the Court’s denial of Plaintiffs’ request to amend the class certification order to expressly indicate that Subclass A’s members include participants in the Hanover and Citizens plans.”  

Disability Benefit Claims

First Circuit

Prohkorova v. Unum Life Insurance Company of America, No. CV 17-30064-MGM, 2018 WL 1913801 (D. Mass. Apr. 23, 2018) (Magistrate Judge Katherine A. Robertson).  The court granted in part and denied in part Plaintiff’s motion to supplement the administrative record.  The court permitted the record to be supplemented with Unum’s own documents directing claims handlers how to evaluate a disability claim.  The court denied the motion as to portions of the Claims Manual that address Unum’s procedures for assessing a claimant’s ability to perform the duties of her occupation, medical information and resources, independent assessments, and Unum’s Quality Compliance Criteria documents.  The court permitted vocational resource material that was listed in the claims note authored by a Unum agent but not any new vocational resource material.

Sixth Circuit

Jackson v. Blue Cross Blue Shield of Michigan Long Term Disability Program, No. 17-12537, 2018 WL 1964673 (E.D. Mich. Apr. 26, 2018) (Judge Avern Cohn).  Where Plaintiff claimed long-term disability benefits due to back pain, fibromyalgia, and diabetes, the court found that the Plan did not abuse its discretion in denying benefits on the basis that there was a lack of objective medical evidence to support Plaintiff’s complaints of pain.  Here, Plaintiff underwent two IMEs and two Transferable Skills Analyses where he was examined in person.  The court found that Plaintiff’s ongoing pain-related symptoms don’t prevent him from working in a sedentary position.

Tenth Circuit

Mark v. Aetna Life Insurance Company, et al., No. 17-CV-00441-WJM-MJW, 2018 WL 1940590 (D. Colo. Apr. 25, 2018) (Magistrate Judge Michael J. Watanabe).  The court recommended that Aetna’s denial of short-term disability benefits be reversed and the case be remanded to Aetna with instructions to fully consider the entire record and to request and obtain additional documentation if necessary.  Of note, the court stated that it “must bear in mind that Mark sought disability benefits and pursued her appeal without representation. The AR clearly indicates that she was trying her best to cooperate with Aetna and provide the requested documentation. In truth, [the treating doctor] dropped the ball on his end, a fact that Aetna knew or should have known. …  Aetna had a mechanism to obtain that additional evidence: an independent medical exam. While Defendants are technically correct that the Plan does not mandate an in-person medical examination, Aetna could not ‘shut [its] eyes to readily available information when the evidence in the record suggests that the information might confirm the beneficiary’s theory of entitlement and when they have little or no evidence in the record to refute that theory.’”  The court determined that Aetna’s failure to conduct an IME was arbitrary and capricious.


Fifth Circuit

Wittmann v. Unum Life Ins. Co. of Am., No. CV 17-9501, 2018 WL 1912163 (E.D. La. Apr. 23, 2018) (Magistrate Judge Joseph C. Wilkinson, Jr.).  The court granted in part Plaintiff’s motion to compel responses to discovery requests aimed at Unum’s conflict of interest.  The court overruled Unum’s attorney-client privilege and work product objections because the “fiduciary exception” precludes assertion of these objections as to the Unum attorneys who participated in the claim review, evaluation and denial of Plaintiff’s long-term disability benefits.  The court also ordered that Unum must provide a supplemental written response to Plaintiff’s First Set of Requests for Production of Documents that deletes the “General Objections” and clearly states all additional interrogatory answers and written responses to requests for production approved by the court in its opinion.  

Eleventh Circuit

Perera v. Metropolitan Life Insurance Company, No. 3:17-CV-195-J-39MCR, 2018 WL 1899041 (M.D. Fla. Apr. 20, 2018) (Magistrate Judge Monte C. Richardson).  In this case seeking payment of accidental death benefits, the court denied Plaintiff’s motion to compel production of MetLife’s claim handling guidelines.  The court explained that Plaintiff has not presented any evidence that the guidelines were relied upon or submitted, considered, or generated in reviewing Plaintiff’s claim, so there is no reason for the guidelines to be produced or included in the administrative record.  The court denied attorneys’ fees to both parties as it relates to the motion.

ERISA Preemption

Second Circuit

Saini v. Cigna Life Ins. Co. of New York, No. 17 CIV. 1922 (KPF), 2018 WL 1959551 (S.D.N.Y. Apr. 24, 2018) (Judge Katherine Polk Failla).  In this case where Cigna denied payment of accidental death benefits on the basis that the insured’s drowning was caused by a sudden cardiac event, the court determined that New York Insurance Law Section 2601 (prohibiting insurers from engaging in unfair settlement practices) does not create a private right of action.  The court also determined that ERISA preempts Plaintiff’s  claim under Section 349 of the New York General Business Law (prohibiting deceptive acts or practices in the conduct of any business in the state of NY).

Eleventh Circuit

Morton v. Nexagen Networks, Inc. & Insperity PEO Services, L.P., No. 8:18-CV-386-T-24 MAP, 2018 WL 1899038 (M.D. Fla. Apr. 20, 2018) (Judge ).  The court determined that Plaintiff’s state law age discrimination claim is not preempted under ERISA and denied Defendants’ motion to dismiss.  There is no complete preemption because Plaintiff’s claim—that Defendants terminated him because of his age and treated him differently due to his age—is supported by a legal basis independent of ERISA.  The court agreed with Plaintiff that his age discrimination claim is saved from express preemption due to the exception set forth in § 514(d).

Exhaustion of Administrative Remedies

Tenth Circuit

Tronsgard v. FBL Financial Group, Inc., No. 17-2393-DDC-JPO, 2018 WL 1942648 (D. Kan. Apr. 25, 2018) (Judge Daniel D. Crabtree).  In this case alleging ERISA violations related to the misclassification of employee status, the court determined that the Tenth Circuit would hold that ERISA’s exhaustion requirement is not jurisdictional, but instead is an affirmative defense, and that a plaintiff need not plead exhaustion to survive a Rule 12(b)(6) motion to dismiss.  In addition, Plaintiffs have alleged facts that are capable of supporting a finding or inference that it would have been futile for them to exhaust their administrative remedies before filing their ERISA claims.  Defendants have asserted for decades that their insurance agents are independent contractors.  

Pension Benefit Claims

Eleventh Circuit

Watkins v. Goodyear Pension Plan, No. 4:17-CV-461-VEH, 2018 WL 1964591 (N.D. Ala. Apr. 26, 2018) (Judge Virginia Emerson Hopkins).  In this case “attempting to bring some form of equitable estoppel claim” under Section 502(a)(1)(B) against the Plan for refusing to allow his second wife to receive a survivor pension benefit, the court determined that the Plan did not abuse its discretion in not changing the contingent annuitant after Plaintiff already elected the 50% joint and survivor annuity when married to his first wife and was receiving plan benefits when his first wife died.

Pleading Issues & Procedure

Seventh Circuit

Divane v. Northwestern University, et al., No. 16 C 8157, 2018 WL 1942649 (N.D. Ill. Apr. 25, 2018) (Judge Jorge L. Alonso).  The court determined that Plaintiffs’ lawsuit seeking relief under § 502(a)(2) seeks equitable relief, thus that Plaintiffs are not entitled to a jury trial.  

Provider Claims

Ninth Circuit

Eden Surgical Center v. Cognizant Technology Solutions Corp., No. 16-56422, __F.App’x__, 2018 WL 1958811 (9th Cir. Apr. 26, 2018) (Before: ROGERS, BYBEE, and WATFORD, Circuit Judges).  The court affirmed summary judgment for Defendants.  The court found that waiver is inapplicable here because there is no authority for the proposition that Defendants had an affirmative duty to make it aware of the anti-assignment provision.  Because the anti-assignment provision is valid and enforceable, Eden lacks derivative standing to sue.


Second Circuit

Laurent v. Pricewaterhousecoopers LLP, et al., No. 06-CV-2280 (JPO), 2018 WL 1940431 (S.D.N.Y. Apr. 24, 2018) (Judge J. Paul Oetken).  The court denied Plaintiffs’ motion for clarification or modification.  “In short, the Court has twice concluded that § 502(a)(3) does not authorize Plaintiffs to pursue equitable relief in the form of recalculated benefits. At this point, the proper vehicle for challenging this conclusion is an appeal, rather than a motion under Rule 60.”

Statute of Limitations

Tenth Circuit

Tronsgard v. FBL Financial Group, Inc., No. 17-2393-DDC-JPO, 2018 WL 1942648 (D. Kan. Apr. 25, 2018) (Judge Daniel D. Crabtree).  In this lawsuit alleging misclassification as independent contractors, the court denied dismissal of the ERISA claim based on the statute of limitations because the Complaint presents a factual question about when Plaintiffs discovered or should have discovered the alleged ERISA violation.  The court rejected Defendants’ argument that the claim accrued as of the date Plaintiffs first learned that they were considered an independent contractor.