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Category: Fee Entitlement / Recoverability

Insurer Asks Judge to Reduce Attorney Fees in Coverage Win

May 17, 2022

A recent Law 360 story by Ben Zigterman, “Insurer Asks Judge To Nix Cleveland Bar’s Atty Fee Request” reports that Auto-Owners Insurance Co. told an Ohio federal judge that the attorney for a Cleveland bar should not be awarded $293,000 in fees and expenses it requested after winning a $1.2 million jury verdict over coverage for fire damage.  At most, the insurer argued in the filing, Daniel Shimko should get $91,000 for representing Blues to You Inc., which does business as Wilbert's Food & Music.

In April, a jury ruled in favor of Blues to You on its claims that Auto-Owners breached its contract and acted in bad faith, awarding the bar $1.2 million, including $375,000 in punitive damages.  The bar had accused Auto-Owners of failing to properly investigate and not fully covering its claims for fire, smoke and water damage from a 2019 fire, as well as water damage from a 2020 fire in a unit above the bar.

While the bar said the insurer made a "pitifully low offer" and "dragged its feet," the insurer argued that Blues to You misrepresented the value of its claims by duplicating losses from the first fire in its losses from the second.  After the jury ruled in its favor, the bar asked for more than $271,000 in attorney fees based on 706.2 hours of work at $385 an hour, plus about $21,000 in legal expenses.

"More than a little skill and experience in this field is paramount to successfully represent an insured in such a legal proceeding," the bar wrote earlier this month. "Plaintiff's counsel went beyond proving bad faith.  Plaintiff successfully proved that Auto-Owners acted with ill will in the manner in which it adjusted plaintiff's two claims."  In response, Auto-Owners questioned whether Shimko really spent 700 hours on the suit, noting that its attorneys only spent about 504 hours on it.  "For plaintiff's counsel to allege that he spent 200 more hours is inconceivable and suggests that plaintiff's counsel's stated time is overstated," the insurer wrote.

It also argued that Shimko's proposed hourly rate is excessive for solo practitioners in Ohio and that the jury didn't provide for litigation expenses to be recovered.  The insurer also disputed that any attorney fees should be granted, arguing that the evidence did not back up an award for punitive damages.  "There is absolutely no evidence in the record of conduct on behalf of defendant that can be remotely categorized as being malicious," Auto-Owners wrote.  It also has filed a motion for a new trial, arguing that the jury's verdict "should have shocked the conscience of the court."

School Parents Denied Attorney Fees in Mask Dispute

May 12, 2022

A recent Law 360 story by Matthew Santoni, “Behrend Law Group Denied Fee Bid in School Mask Dispute” reports that a group of parents who sued to make a Pittsburgh-area school district keep its mask mandate were not the "prevailing party" for the purpose of awarding Behrend Law Group attorney fees just because the Third Circuit had temporarily restored the mask order, a Pennsylvania federal judge ruled.  U.S. District Judge William S. Stickman IV said he had denied the parents a temporary restraining order on the district, and they had never argued their case on the merits on appeal, so a temporary order from a single Third Circuit judge keeping the masks on until the case was dismissed was not the same as a win – and didn't merit nearly $109,000 in fees and costs that the parents' attorneys sought from the Upper St. Clair School District.

"The interim relief granted by the Third Circuit to maintain the status quo pending appeal does not constitute relief on the merits and does not render plaintiffs prevailing parties," Judge Stickman wrote.  "Plaintiffs had the burden of establishing their right to relief as prevailing parties, and the court has determined that they failed to do so.  Attorney fees are, therefore, not available."

Attorneys Ken Behrend and Kevin Miller had represented a group of parents of children with disabilities who claimed in January that the school district's decision to make masks optional while COVID-19 was still spreading would put their children at risk.  The school district, the parents claimed, had violated the Americans with Disabilities Act by forcing them to choose between risking infection and being shunted back into online learning.

Judge Stickman had denied the parents' request for an injunction, ruling that they were unlikely to succeed on the merits of their ADA claim.  But when they appealed to the Third Circuit later in January, U.S. Circuit Judge Thomas L. Ambro issued an order that temporarily granted the parents' request to keep the district's mask mandate while the case was pending.

Briefs were submitted, and the case was set for argument in March along with a similar suit from the North Allegheny School District, where a different judge had granted another group of parents' request for an injunction keeping masks.  But before the case was argued, the U.S. Centers for Disease Control & Prevention issued new guidance for measuring the level of the pandemic's spread and the necessity of masks, such that the Third Circuit declared the appeals moot.

When Behrend and Miller argued that the Third Circuit had granted the relief their clients wanted and they were entitled to fees, the school district countered that he hadn't actually gotten a ruling on the merits and therefore hadn't "prevailed." Judge Stickman agreed.  In other cases, the Third Circuit had denied fees to parties that had gotten temporary restraining orders and rulings that they had a likelihood of success on the merits, but the parents in Upper St. Clair hadn't even gotten that much, Judge Stickman said.  The Third Circuit's order wasn't enough, either, he said.

"The relief afforded to plaintiffs was not merits-based," Judge Stickman wrote.  "Here the Third Circuit's entry of a temporary emergency injunction was specifically viewed by that court as temporary.  Moreover, it did not even attempt to discuss and determine the substantive issues raised by the parties -- much less express a determination that plaintiffs had satisfied their burden to demonstrate that injunctive relief was warranted."

Without prevailing on the merits, the parents and Behrend could not seek to make the school district pay their attorney fees and were left to cover their own costs, the judge said.

Judge Cuts ‘Excessive’ Attorney Fees for UBS Investor

May 11, 2022

A recent Law 360 story by Jon Hill, “NY Judge Cuts ‘Excessive’ Atty Fee Sanction For UBS Investor” reports that a New York state judge ordered a UBS investor to pay $30,000 in legal costs over a rejected effort to revive his derivative suit against the bank's top officials, saying his opponents' original request for him to pay more than double that to their counsel at Sullivan & Cromwell was "excessive."  In an order, Manhattan County Supreme Court Justice Jennifer Schecter declined to grant the full fee award submitted by the UBS Group AG defendants in the case, whose Sullivan & Cromwell LLP attorneys wanted a total of more than $61,000 from plaintiff Ezra Cattan.

Their request came after the judge sanctioned Cattan last month for making what she deemed an ill-conceived motion to re-argue his case, ruling that he would have to cover his opponents' legal bills for fighting his motion.  In response, UBS' Sullivan & Cromwell team requested $45,000 for its work opposing the motion and another roughly $16,000 for its time spent preparing the fee award application.  But Justice Schecter concluded that this $61,000 total was too much.

Although Sullivan & Cromwell's opposition to Cattan's motion had been "understandably thorough" given the circumstances and "notwithstanding the quality of defense counsel's work and the reasonable though expensive hourly rates they charge, spending more than 60 hours on the opposition papers and this fee application was excessive," Justice Schecter wrote.  Cattan, for his part, had objected to the UBS defendants' $61,000 fee award request as unreasonable and urged that it be slashed to about $25,000, if not less.

Instead, Justice Schecter said that a total award of $30,000 "would be reasonable ... for having to oppose plaintiff's frivolous motion for re-argument and renewal."  Cattan's motion sought to reopen his derivative suit against top officials at UBS.  Filed in 2020, the case pinned blame on the bank's leaders — including then-CEO Sergio Ermotti — for what Cattan, a shareholder, claimed has been an "endless train" of damaging scandals, investigations and lawsuits for the bank going back more than a decade.

Justice Schecter threw out the case in December, ruling that Cattan's claims were covered by a forum selection clause in the bank's corporate charter that designated Switzerland as the proper venue.  But Cattan subsequently moved to keep the case alive by filing both a notice of appeal and a motion for re-argument.  In that February motion, he contended that the judge lacked the power to dismiss his suit on "forum non conveniens" grounds and should grant a do-over.

That challenged was slapped down last month by Justice Schecter, who said that it misconstrued her dismissal reasoning and "should never have been made."  At the same time, the judge granted a request by the UBS defendants to impose sanctions on Cattan for what they called his "frivolous" motion.  "Plaintiff shall therefore reimburse defendants for the reasonable costs and attorneys' fees incurred in opposing this motion," Justice Schecter ordered last month.

Article: Courts Are Right to Reject Insurer ERISA Attorney Fee Awards

May 9, 2022

A recent Law 360 article by Elizabeth Hopkins, “Courts Are Right To Reject Insurer ERISA Atty Fee Award” reports on ERISA attorney fee awards.  This article was posted with permission.  The article reads:

As the U.S. Supreme Court has often recognized, the Employee Retirement Income Security Act is remedial legislation that is primarily intended to protect plan participants and beneficiaries, promote their interests and ensure that they receive the benefits they are promised.  According to the U.S. Court of Appeals for the Ninth Circuit's 1984 ruling in Smith v. CMTA-IAM Pension Trust: "An important aspect of that protection is to afford [plan participants and beneficiaries] effective access to federal courts."

And one of the ways that this access is promoted is through ERISA's fee-shifting provision, which grants courts in actions brought by plan participants and beneficiaries the discretionary authority to allow a reasonable attorney fee and cost of action to either party.  Despite these protective statutory goals, individual ERISA claimants face uphill battles in attempting to reverse adverse benefit determinations.  They are not entitled to anything like a full trial in federal court, but are instead normally stuck with a trial on the record that was assembled by the decision-making fiduciary, who is in many instances entitled to great deference.

And the only recovery they can hope to achieve if they are successful is full payment of the benefits that they were always entitled to and perhaps some interest on this amount.  Given all these hurdles and limitations to recovery, it shouldn't come as a surprise that it is not always easy for ERISA plaintiffs to obtain counsel, especially when there is only a small amount of benefits at stake.

For this reason, as the Ninth Circuit explained in Smith, "without counsel fees the grant of federal jurisdiction is but a gesture for few [plaintiffs] could avail themselves of it."  Plan participants and beneficiaries who successfully challenge benefit denials or bring successful fiduciary breach suits against plan fiduciaries do invariably seek and almost always are awarded some attorney fees under this provision.

The Supreme Court made clear in 2010 in Hardt v. Reliance Standard Life Insurance Co., that participants need not even be prevailing parties in an ERISA action to qualify for fees, so long as they have had "some degree of success on the merits."  Once the success threshold has been met, to determine whether a discretionary award of fees is warranted, courts apply a five-factor test first developed in 1993 by the U.S. Court of Appeals for the Fourth Circuit in Quesinberry v. Life Insurance Co. of North America — factors that clearly and intentionally favor successful plaintiffs.

But a potent new threat to the ability of plan participants and beneficiaries to bring suit is looming.  Increasingly, insurance companies are seeking attorney fee awards against claimants who are partially or wholly unsuccessful in overcoming deference and other substantive and procedural advantages to the plan decision makers, and are thus unable to have a denial of benefits reversed.

For the most part, courts continue to reject attorney fee applications from insurance companies that successfully defeat lawsuits seeking plan benefits.  A November 2021 decision in Martin v. Guardian Life Insurance Co. of America from the U.S. District Court for the Eastern District of Kentucky is instructive of both the heavy-handed tactics of insurance companies seeking fees from claimants and one court's reaction.  In Martin, the insurance company that insured disability benefits sought nearly $138,000 against the claimant, the father of a minor child whose only income was roughly $756 a month in veterans benefits and who had only $1,500 in his bank account.

The court seemed especially put off by Guardian's argument that Martin declined to participate in an independent medical examination and that this indicated bad faith, finding, to the contrary, that his attested reasoning for hesitation about the examination was a concern with going to an unknown medical facility during the COVID-19 pandemic.  And the court noted that granting Guardian's motion for attorney fees "would tend to create a chilling effect on other plaintiffs seeking redress under ERISA."

Other courts have expressed similar concerns in denying fee applications asserted by insurance companies against disability plaintiffs.  For instance, in December 2021, the U.S. District Court for the Western District of Washington in Amoroso v. Sun Life Assurance Co. of Canada, declined to order the plaintiff to pay $66,000 in attorney fees to the insurance company simply because it "completely prevailed on the merits."

Noting that application of the five factors that courts apply in determining whether fees are warranted very frequently suggests that attorney fees should not be charged against ERISA plaintiffs, the court concluded that was certainly true with respect to Sun Life's application for fees in that case.  With respect to the first factor, the Amoroso court concluded that there was nothing approaching bad faith in the record.  The court found the second factor weighed strongly against a fee award because Sun Life did not show that Amoroso had sufficient assets to pay an award, and the facts that his home was valued at over $1 million and that he had a medical practice was simply irrelevant with respect to his ability to pay.

Addressing Sun Life's most revealing argument — that the third factor weighed in its favor because awarding fees would deter other participants from brining unsuccessful benefit suits — the court disagreed, reasoning that deterring disabled plan participants from suing for plan benefits was flatly inconsistent with ERISA's policy and with ERISA's fee-shifting provision.

Likewise, the court rejected out of hand Sun Life's argument that awarding fees would benefit all other participants and beneficiaries of the plan by saving the insurance company money and perhaps leading to lower premiums.  The court found instead that such an award "would deter insureds from seeking such benefits at all, and it would only embolden insurers in denying claims at the administrative level."

Considering the relative merits of the parties' positions — the final factor — the court declined to "force a losing ERISA plaintiff to pay an insurer's attorneys' fees based solely on the fact that he lost," reasoning that to do so "would not be consistent with ERISA, the better-reasoned cases decided under it, equity, or common sense."

In the court's view, such a fee award in favor of an insurer would only be justified in unusual circumstances not presented by Amoroso's case.  Numerous other recent decisions have had no trouble denying insurers' requests for attorney fee awards against unsuccessful benefit claimants.

At this point, it appears that the recent and sharp uptick in fee applications from insurance companies seeking fees against plan participants and beneficiaries who are unsuccessful in reversing a denial of benefits is meeting with little or no success in the courts.

Application of the Quesinberry test, along with a healthy reluctance to punish disabled, sick or retired plan participants for seeking to obtain plan benefits, has quite correctly led courts in all but the most unusual circumstances to reject these fee applications.  Let's hope these kinds of decisions discourage insurance companies from engaging in this unfair tactic.

Elizabeth Hopkins is a partner at Kantor & Kantor LLP in Northridge, CA.

Honeywell Wants Workers to Cover Attorney Fees in ERISA Suit

May 4, 2022

A recent Law 360 story by Abby Wargo, “Honeywell Wants Workers To Cover Atty Fees in ERISA Suit” reports that Honeywell International Inc. told a Michigan federal judge to grant it attorney fees after it won a retirement benefits suit against its former workers, saying the workers' unnecessary prolonging of the suit caused the company to expend additional resources that should be reimbursed.  The corporation asked U.S. District Judge Denise P. Hood to approve its request for a "carefully limited" sum of $263,485 after winning a decade-long suit against the United Autoworkers of America and Honeywell retirees.

Honeywell asked the court to approve only the payment of fees incurred during a period of several months in 2018 and early 2019, rather than the full 11 years of the lawsuit, which it told the judge is a reasonable request compared to the millions of dollars spent throughout the suit.  "Having defeated all of plaintiff's claims, Honeywell should be awarded a narrow portion of its attorneys' fees.  Specifically, the court should award Honeywell's fees most related to plaintiff's second summary judgment filing, as well as the unsupportable vesting claims that plaintiff pursued on appeal," according to the motion for attorney fees.

Honeywell said that it is proposing "voluntary concessions" to its requested award, such as excluding fees paying for the time of noncore legal team members and reducing the rates of the award to less than what Honeywell was actually paying for its lawyers.  If the award is granted, it would be only a small fraction of the millions of dollars Honeywell spent fighting the lawsuit, it said.

But Honeywell said that the plaintiffs were "unpersuaded" by the rulings and moved for summary judgment again, though they still lost. Regardless, the company's attorneys had to spend hundreds more hours on the case than was necessary, it said in the fee motion.