Flaaen v. McLane Company, Inc et al, No. 3:2015cv05899 - Document 59 (W.D. Wash. 2017)
Court Description: ORDER granting in part and denying in part 51 Motion for Attorney Fees. Signed by Judge Benjamin H. Settle. (MGC)
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Flaaen v. McLane Company, Inc et al Doc. 59 1 2 3 4 5 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT TACOMA 6 7 8 9 10 11 ANTHONY R. FLAAEN, v. 14 15 16 ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S MOTION FOR AN AWARD OF ATTORNEY’S FEES Defendant. This matter comes before the Court on Plaintiff Anthony Flaaen’s (“Flaaen”) motion for an award of attorney’s fees (Dkt. 51). The Court has considered the pleadings filed in support of and in opposition to the motion and the remainder of the file and hereby grants in part and denies in part the motion for the reasons stated herein. 17 18 Plaintiff, PRINCIPAL LIFE INSURANCE COMPANY, 12 13 CASE NO. C15-5899 BHS I. PROCEDURAL HISTORY On December 10, 2015, Flaaen filed a complaint for long-term disability benefits 19 against Defendants McLane Company, Inc. (“McLane”) and Principal Life Insurance 20 Company, Inc. (“Principal”). Dkt. 1. Flaaen’s sole claim was wrongful denial of benefits 21 22 ORDER - 1 Dockets.Justia.com 1 under the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001, et seq. 2 (“ERISA”). Id. On February 1, 2016, Flaaen dismissed McLane. Dkt. 6. On June 22, 2016, Flaaen filed a motion for partial summary judgment arguing 3 4 that the applicable long-term disability plan’s (“LTD”) discretionary clause is invalid and 5 unenforceable as a matter of law. Dkt. 16. On December 22, 2016, the Court granted the 6 motion and determined that the standard of review was de novo. Dkt. 28. On May 31, 2017, the parties filed opening briefs for the bench trial. Dkts. 33, 34. 7 8 On June 16, 2017, the parties responded. Dkts. 36, 37. On June 30, 2017, the parties 9 replied. Dkts. 39, 40. On July 20, 2017, the Court held a one-day bench trial. Dkt. 41. 10 On August 9, 2017, the Court requested supplemental briefing. Dkt. 42. On August 18, 11 2017, the parties submitted additional responses. Dkts. 43, 44. On August 25, 2017, the 12 parties submitted additional replies. Dkts. 46, 47. On September 27, 2017, the Court 13 ruled in favor of Flaaen. Dkt. 48. On November 6, 2017, Flaaen filed a motion for attorney’s fees. Dkt. 51. On 14 15 November 20, 2017, Principal responded. Dkt. 53. On November 21, 2017, Flaaen 16 replied. Dkt. 54. II. DISCUSSION 17 18 19 A. Fee Award Under ERISA’s civil enforcement provision, 29 U.S.C. § 1132 (g)(1), courts have 20 discretion to award reasonable attorneys’ fees and costs, where a party has achieved 21 “some degree of success on the merits.” Hardt v. Reliance Standard Life Ins. Co., 560 22 U.S. 242, 256 (2010). In this case, it is undisputed that Flaaen was successful on the ORDER - 2 1 merits. Dkt. 53 at 4 (“Principal Life acknowledges [the ruling in favor of Flaaen] is 2 likely ‘some success on the merits’”). Once a court determines that a litigant has 3 achieved “some degree of success on the merits,” the court must determine whether the 4 five factors set forth in Hummell v. S.E. Rykoff & Co., 634 F.2d 446 (9th Cir. 1980), 5 weigh in favor of awarding that litigant fees and costs. Simonia v. Glendale 6 Nissan/Infiniti Disability Plan, 608 F.3d 1118, 1121 (9th Cir. 2010) (quoting 29 U.S.C. § 7 1132(g)(1)). The Hummell factors are as follows: 8 9 10 11 12 13 (1) the degree of the opposing parties’ culpability or bad faith; (2) the ability of the opposing parties to satisfy an award of fees; (3) whether an award of fees against the opposing parties would deter others from acting under similar circumstances; (4) whether the parties requesting fees sought to benefit all participants and beneficiaries of an ERISA plan or to resolve a significant legal question regarding ERISA; and (5) the relative merits of the parties’ positions. Hummell, 634 F.2d at 453. When applying the Hummell factors, courts “must keep at the forefront ERISA’s 14 remedial purposes that should be liberally construed in favor of protecting participants in 15 employee benefit plans.” McElwaine v. US W., Inc., 176 F.3d 1167, 1172 (9th Cir. 16 1999)(internal quotations and citation omitted). Further, “no single Hummell factor is 17 necessarily decisive.” Simonia, at 1122. Principal also notes that sometimes courts deny 18 an award of fees when “special circumstances would render such an award unjust.” 19 McElwaine, 176 F.3d at 1172. 20 1. 21 Flaaen argues that this factor weighs in favor of an award of fees. While Flaaen 22 Culpability or Bad Faith fails to show that Principal acted in bad faith, Flaaen presents a persuasive argument that ORDER - 3 1 Principal was culpable. Neither party cited Ninth Circuit authority elaborating on the 2 issue of “culpable conduct,” but Principal cited district courts in the Second Circuit for 3 the proposition that a “party is only culpable when its conduct is intentional, 4 blameworthy, and results in the breach of a legal duty.” See, e.g., Perreca v. Gluck, 2004 5 WL 2793270, at *3 (S.D.N.Y. Dec. 6, 2004). Moreover, the factor requires “conduct 6 [that] normally involves something more than simple negligence . . . . [It] implies that the 7 act or conduct spoken of is reprehensible or wrong, but not that it involves malice or a 8 guilty purpose.” Algie v. RCA Communications, Inc., 891 F.Supp. 875, 891 (S.D.N.Y. 9 1994). 10 Under this standard, Principal argues that its actions do not constitute culpable 11 conduct. The Court disagrees. The Court found that Principal at least failed to address 12 and at most ignored Flaaen’s evidence during the processing of Flaeen’s claims. Dkt. 48 13 at 16–20. Principal continues this tactic in its current response by basing argument on 14 information obtained from Flaaen’s social media profiles instead of actual evidence such 15 as Flaaen’s declarations. Dkt. 53 at 6. This conduct was wrong earlier, and it is wrong 16 now. Moreover, the Court found that Principal repeatedly based its decisions on new 17 occupations that it considered qualifying gainful employment for Flaaen. In one instance, 18 Principal’s claim manager based the denial on Flaaen’s claim on a determination that 19 Flaaen qualified for the position of fleet manager without any underlying evidence to 20 support Flaaen’s qualification for this position. Dkt. 48 at 16–17. The Court concludes 21 that this conduct is more than simple negligence. Therefore, the Court finds that this 22 factor weighs in favor of an award because Principal’s conduct was culpable. ORDER - 4 1 2. Ability to Satisfy Award 2 It is undisputed that Principal has the ability to satisfy an award. The Court, 3 however, finds that this factor is at most neutral. Awarding fees because an entity is 4 financially successful is the least persuasive reason the Court is required to consider. 5 3. Deterrence 6 Under this factor, Principal argues that “ERISA plan fiduciaries should not be 7 deterred from defending against claims they legitimately believe are precluded from 8 coverage.” Dkt. 53 at 9. The Court agrees, but Principal fails to recognize all of the 9 circumstances in this proceeding. Principal relied in part on the proposition that a 10 beneficiary could be considered gainfully employed if, at some point in the future, he was 11 able to secure an income that would be greater than his monthly benefits under the 12 ERISA plan. Dkt. 45 at 10 (citing Geiger v. Aetna Life Ins. Co., 845 F.3d 357 (7th Cir. 13 2017)). If rejection of this proposition was the sole issue in this case, there would be 14 little need to deter future conduct. This matter, however, also involved issues of 15 Principal’s erroneous review of Flaaen’s evidence and somewhat baseless denials of his 16 claims. Moreover, another court has recently found that “[a]n award of fees [against 17 Principal] may deter other providers from failing to consider evidence submitted by their 18 beneficiaries that supports the continuation of benefits.” Paulson v. Principal Life 19 Insurance Company, No. C16-5268RJB (W.D. Wash. Oct. 26, 2017) (“Paulson”). To the 20 extent that Principal has repeatedly ignored evidence submitted by beneficiaries, the 21 conduct should be deterred. Therefore, the Court finds that this factor weighs in favor of 22 an award. ORDER - 5 1 4. All Beneficiaries or Significant Legal Question 2 The fourth Hummell factor is “whether the parties requesting fees sought to benefit 3 all participants and beneficiaries of an ERISA plan or to resolve a significant legal 4 question regarding ERISA.” Hummell, 634 F.2d at 453. Although it is debatable 5 whether Flaaen sought to benefit others, it is undisputed that this matter resolved the 6 significant legal question regarding the standard of review in Washington. Dkt. 28. 7 Therefore, the Court concludes that this factor weighs in favor of an award. 8 5. Relative Merits 9 The fifth Hummell factor is “the relative merits of the parties’ positions.” 10 Hummell, 634 F.2d at 453. Although the Court found significant issues with Principal’s 11 positions under de novo review, Principal asserted relatively stronger positions under the 12 contract’s arbitrary and capricious standard of review. See, e.g., Geiger, 845 F.3d 357. 13 In other words, Principal’s initial positions appeared strong, but steadily weakened as the 14 matter proceeded. Thus, the Court finds that this factor is neutral to slightly in favor of 15 Flaaen. 16 6. Special Circumstances 17 “[A]bsent special circumstances, a prevailing ERISA employee plaintiff should 18 ordinarily receive attorney’s fees from the defendant.” Smith v. CMTA-IAM Pension Tr., 19 746 F.2d 587, 590 (9th Cir. 1984). 20 In this case, Principal argues that special circumstances warrant a denial of 21 Flaaen’s request for fees. Principal, however, fails to cite any authority for the 22 proposition that the facts of this case amount to special circumstances. Instead, Principal ORDER - 6 1 simply argues that awarding fees in this case would incentivize beneficiaries to forgo 2 gainful employment and sue to maintain benefits. Dkt. 53 at 5. While such 3 circumstances are possible, Principal has failed to show that they are probable. 4 Moreover, if the record reflects that a beneficiary is voluntarily forgoing gainful 5 employment, then it is unlikely that the beneficiary would prevail on the merits of an 6 ERISA claim. Therefore, the Court does not find that special circumstances exist to deny 7 fees. 8 7. Award Summary 9 Under the Hummell factors, the Court concludes that Flaaen is entitled to an award 10 of attorney’s fees. Three of the factors weigh in favor of an award and the other two are 11 neutral. Therefore, the Court grants Flaaen’s motion as to an award. The next issue is 12 whether the requested fees are reasonable. 13 B. 14 Fee Calculation “The Ninth Circuit adopts the hybrid lodestar/multiplier approach used by the 15 Supreme Court in Hensley v. Eckerhart, 461 U.S. 424, 103 S. Ct. 1933, 76 L.Ed.2d 40 16 (1983), to determine the proper amount of attorney’s fees awards in ERISA actions.” 17 Arnett v. Hartford Life & Acc. Ins. Co., 558 F. Supp. 2d 975, 980–81 (C.D. Cal. 2007) 18 (citing Van Gerwen v. Guarantee Mut. Life Co., 214 F.3d 1041, 1045 (9th Cir. 2000)). 19 The fee applicant bears the burden of documenting the appropriate hours expended in the 20 litigation and must submit evidence in support of those hours worked. Gates v. Gomez, 21 60 F.3d 525, 534–35 (9th Cir. 1995). The party opposing the fee application has a burden 22 of rebuttal that requires submission of evidence to the district court challenging the ORDER - 7 1 accuracy and reasonableness of the hours charged or the facts asserted by the prevailing 2 party in its submitted affidavits. Id. 3 In this case, Principal challenges Flaaen’s attorney’s rates and the hours expended. 4 1. 5 In determining hourly rates, the Court must look to the “prevailing market rates in 6 the relevant community.” Bell v. Clackamas County, 341 F.3d 858, 868 (9th Cir. 2003). 7 The rates of comparable attorneys in the forum district are usually used. See Gates v. 8 Deukmejian, 987 F.2d 1392, 1405 (9th Cir. 1992). 9 Rates In this case, Principal objects to the hourly rates requested by Flaaen’s attorneys. 10 The requested hourly rates are as follows: $500 for lead attorney Chris Roy, $450 for 11 attorney Darrin Class, and $185 for paralegal Danielle Barber. Flaaen argues that another 12 judge in this district recently found that these rates were reasonable in the community. 13 Dkt. 51 at 6 (citing Paulson). Principal fails to produce any evidence to undermine this 14 finding and relies on similar arguments that were rejected in Paulson. Therefore, the 15 Court finds that Flaaen’s requested rates are reasonable. 16 2. 17 “A district court should exclude from the lodestar amount hours that are not 18 reasonably expended because they are ‘excessive, redundant, or otherwise unnecessary.’” 19 Van Gerwen, 214 F.3d at 1045 (quoting Hensley, 461 U.S. at 433). 20 Hours In this case, the parties dispute the reasonableness of the hours worked. On one 21 hand, Flaaen cites authority for the proposition that “the court should defer to the winning 22 lawyer’s professional judgment as to how much time he was required to spend on the ORDER - 8 1 case; after all, he won, and might not have, had he been more of a slacker.” Moreno v. 2 City of Sacramento, 534 F.3d 1106, 1112 (9th Cir. 2008). The Court agrees that it is 3 difficult to second guess the number of hours spent on a case when the attorney is 4 unlikely to receive any compensation for his time if the Court ruled in favor of Principal. 5 On the other hand, Principal details some questionable hour entries as follows: 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 While Plaintiff explains his counsel’s hours by indicating that Mr. Roy prepared the complaint, reviewed the administrative record, reviewed dispositive motion drafts and pleadings and prepared this motion, it should be noted that the complaint contained a total of 24 allegations, the drafting of which took Plaintiff’s counsel 7.2 (!) hours. It thereafter took Plaintiff’s counsel another 18 minutes to review the complaint once it was filed. [DE #51-1, p. 20] Plaintiff’s counsel further claims that the excessive nature of the fees incurred are a result of him having to argue the standard of review in a partial motion for summary judgment due to Principal Life’s “refusal” to stipulate to de novo review. As it was an issue of first impression for this Court whether a de novo standard of review applies in a case when the underlying group insurance policy was issued and delivered in another state and contains an express discretionary clause, such as here, Principal Life’s desire to brief the issue – and to preserve its arguments for an appeal – rather than stipulating to a standard of review case law did not mandate, Plaintiff’s argument goes nowhere. Moreover, whether or not Principal Life “refused” to give in to Plaintiff’s request certainly does not justify a total of 35.0 hours of legal research in connection with Plaintiff’s opening brief, predominantly impermissibly block billed (plan document research 7.2 hours, Texas discretionary ban research 3.3 hours, choice of law research 8.1 hours, public policy research 3.1 hours, legal research on Hirschkron v. PLIC 8.0 hours and further choice of law research 5.3 hours) and another 18.0 hours in drafting the 15 page brief. [DE# 51-1, p. 21] It then took Plaintiff’s counsel an incredible 3.3 hours to review Principal Life’s 17 page response brief (that is a speed of one page every 11.6 minutes.) [Id.] True to form, Plaintiff’s counsel subsequently spent another 13.4 hours researching Washington law and the incorporation of policy documents into the plan, and 11.4 hours drafting an 11 page reply brief. [Id.] Plaintiff’s counsel spent an additional 25.1 hours on the opening supplemental brief (including 3.4 hours “retooling” a previous draft), 3.5 hours reviewing Principal Life’s 10 page supplemental brief, and then another 12.5 hours on the final brief. [DE# 51-1, p. 22] All in all, the ORDER - 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 briefing of Plaintiff’s motion for partial summary judgment took Plaintiff about 122.2 hours, an equivalent of 3 weeks working 40 hours a week – and equal to the total number of hours counsel for Principal Life spent on the entire matter, including traveling to Tacoma, Washington, for the hearing on the parties’ cross-motions for judgment. One would think that attorneys charging at hourly rates of $500.00 and $450.00 would have found a way to engage in a more efficient drafting effort and did not have to spend an entire business day researching a single ruling. The excessive amount of time spent on this matter continues, however, with 162.9 hours spent by Plaintiff’s counsel on briefing his motion for judgment, split up as follows: 68.8 hours of research and drafting of Plaintiff’s opening brief for judgment, 3.0 hours reviewing Principal Life’s brief, 12.7 hours preparing the response brief, 8.1 hours (!) -- or one entire business day -- reviewing Principal Life’s response brief, 16.0 hours preparing the reply brief (almost an hour of which was devoted to reviewing the Department of Labor regulations which play no role in this case), 2.4 hours reviewing Principal Life’s reply brief and subsequently another 49.1 hours on the two supplemental briefs and 2.8 hours reviewing Principal Life’s briefs. Plaintiff’s counsel’s time spent on briefing the motion for judgment is equivalent to 4 weeks working 40 hours a week and exceeds the total amount of hours spent by counsel for Principal Life on the entire matter by over 40 hours (or an entire week) – including client reporting and traveling to Tacoma, Washington. Finally, Plaintiff’s counsel spends 17.1 hours on his almost 9 page fee motion (which is largely identical to the motion Plaintiff’s counsel filed recently in the Paulson matter.) Dkt. 53 at 17–20. The Court agrees with the majority of Principal’s points. For example, it seems unreasonably excessive to spend four full weeks on the final motion for judgment, spend three full weeks on the motion for partial summary judgment, or spend seventeen hours on an almost identical nine page fee petition. Moreover, Flaaen fails to explain why this case required almost 300 hours of work whereas the similar Paulson matter required less than 80 hours for the same successful result on similar alleged errors by Principal. To the extent that this matter involved litigating the standard of review, the Court finds that the ORDER - 10 1 reasonable additional hours would at most be twice what was requested in Paulson. It is 2 also true that the Court requested some additional briefing in this matter increasing the 3 reasonable number of hours expended. Recognizing that reducing hours in hindsight 4 based on reasonableness is more of an art than a science, the Court finds that Mr. Roy’s 5 hours should be reduced by one third, which results in 200 reasonable hours of work. 6 This is two and a half times what was awarded in Paulson and should adequately 7 compensate Mr. Roy while declining to award compensation for excessive or otherwise 8 unnecessary hours. 9 Regarding the hours requested for Mr. Class and Ms. Barber, the Court finds that 10 Principal has failed to show that these hours are excessive or unreasonable. The 11 requested hours are also consistent with those expended in Paulson. Therefore, the Court 12 grants Flaaen’s request on these hours. 13 3. 14 In conclusion, the Court grants the requested hourly rates and the majority of the 15 Calculation Summary requested hours as follows: 16 Mr. Roy 200 hours x $500 per hour = $ 100,000 17 Mr. Class 82.3 hours x $450 per hour = $ 37,035 18 Ms. Barber 1.4 hours x $185 per hour = Total = $137,294 19 20 21 22 ORDER - 11 $ 259 III. ORDER 1 2 Therefore, it is hereby ORDERED that Flaaen’s motion for an award of 3 attorney’s fees (Dkt. 51) is GRANTED in part and DENIED in part and Flaaen is 4 awarded $137,294 in fees. 5 Dated this 21st day of December, 2017. 6 A 7 8 BENJAMIN H. SETTLE United States District Judge 9 10 11 12 13 14 15 16 17 18 19 20 21 22 ORDER - 12
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