Dobson v. Hartford Financial Services Group Inc., No. 3:99cv2256 (JBA) (D. Conn. 8/2/2002)
| Decision Date | 02 August 2002 |
| Docket Number | No. 3:99cv2256 (JBA).,3:99cv2256 (JBA). |
| Court | U.S. District Court — District of Connecticut |
| Parties | Douglas DOBSON v. THE HARTFORD FINANCIAL SERVICES GROUP, INC., et al. |
Plaintiff Douglas Dobson filed this suit on behalf of a putative class, seeking interest on monthly long-term disability benefit payments which were withheld but eventually paid by defendant Hartford Life and Accident Insurance Company in a lump sum. Plaintiff sought recovery under two theories, one based on a claim of breach of the terms of the disability benefits plan, under ERISA, § 502(a)(1)(B), and one for a breach of fiduciary duty, under ERISA, § 502(a)(3). On cross-motions for summary judgment, the Court granted defendant's motion with respect to the ERISA § 502(a)(1)(B) class claim for interest as a term of the plan and denied the motion for class certification, but denied defendant's motion with respect to plaintiff's individual claim for relief under a breach of fiduciary duty theory, under ERISA § 502(a)(3). Following that ruling, the parties stipulated to judgment in plaintiff's favor on the individual (a)(3) claim. Plaintiff now seeks attorneys' fees in the amount of $214,528.11 and $12,193.46 in costs. As has occurred with every stage of this litigation, the availability and amount of fees claimed is hotly disputed.
ERISA provides that "[i]n any action under this subchapter . . . by a participant, beneficiary, or fiduciary, 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). The Second Circuit has directed district courts to consider five factors when evaluating a request for attorneys' fees and costs under ERISA:
(1) the degree of the offending party's culpability or bad faith, (2) the ability of the offending party to satisfy an award of attorney's fees, (3) whether an award of fees would deter other persons from acting similarly under like circumstances, (4) the relative merits of the parties' positions, and (5) whether the action conferred a common benefit on a group of pension plan participants.
Miller v. United Welfare Fund, 72 F.3d 1066, 1074 (2d Cir. 1995) (quoting Chambless v. Masters, Mates & Pilots Pension Plan, 815 F.2d 869, 871 (2d Cir. 1987)). The Second Circuit appears to have contemplated that these factors will be weighed, rather than applied as a check list. See, e.g., Lauder v. First Unum Life Ins. Co., 284 F.3d 375, 383 (2d Cir. 2002). Here, plaintiff argues that he has met all five factors, while defendant claims that only one factor weighs in plaintiff's favor.1
First, plaintiff claims that the "degree of the offending party's culpability or bad faith" is satisfied because defendant stipulated to judgment on the breach of fiduciary duty claim. As plaintiff notes, this claim was based on defendant's unexplained decision to cut off plaintiff's disability benefits and subsequent failure to reinstate those benefits for thirteen months, notwithstanding evidence in the record before the Court on summary judgment that Hartford's nurse evaluator had determined that plaintiff was disabled under the terms of the plan three weeks after his benefits were terminated. Although defendant argues that the admission of liability for a breach of fiduciary duty is not the same as an admission of bad faith, under the circumstances here, where any explanation has yet to be given by Hartford for its termination of benefits, and in light of the evidence in the record before the Court on summary judgment, the Court concludes that this factor weighs in plaintiff's favor.2
Next, awarding fees in this case will contribute to deterring similar breaches of fiduciary duty. Individual claims for disgorgement of profits on improperly withheld benefits are likely, as here, to result in limited recovery. Absent an award of fees, fiduciaries could simply refuse to pay benefits until immediately before a plan participant filed a suit for benefits, with only minimal risk of exposure for the disgorgement of its profits.3 While the central legal issue in this case was the availability of interest under either 502(a)(1)(B) or 502(a)(3), Hartford's handling (or mishandling) of Dobson's claim gave rise to this litigation. Under these circumstances, awarding fees is necessary to deter plan administrators or fiduciaries from unjustifiably terminating and then refusing to reinstate disability benefits.
The fourth factor, the relative merits of the parties' positions, weighs marginally in plaintiff's favor. While the Court agrees with plaintiff that Hartford's stipulation to judgment in plaintiff's favor on the breach of fiduciary claim and failure to offer any defense of its claims handling does suggest that plaintiff's breach of fiduciary duty claim had merit, Hartford's stipulation expressly reserves its rights to appeal the Court's decision permitting plaintiff to recover under § 502(a)(3). Further, in light of the recent decisions in Great-West Life & Annuity Insurance Co. v. Knudson, ___ U.S. ___, 122 S.Ct. 708 (2002), and Dunnigan v. Metropolitan Life Ins. Co., 277 F.3d 223 (2d Cir. 2002), the scope of the remedies available under ERISA may be said to be less than entirely clear.
Finally, although plaintiff did not prevail on his claim for class relief, a common benefit can be said to have been conferred on a larger class by this litigation. This appears to be the first decision since Knudson holding that disgorgement of profits earned on wrongfully withheld benefits is an equitable remedy under ERISA § 502(a)(3). If the rule of law announced by the Court in this litigation stands, it will confer a benefit on other plan participants in plaintiff's position.
In summary, weighing the Chambless factors, particularly the need for fees as deterrence under these circumstances, and bearing in mind the Second Circuit's concern that "ERISA's attorney's fee provisions must be liberally construed to protect the statutory purpose of vindicating retirement rights, even when small amounts are involved," Chambless, 815 F.2d at 872, the Court concludes that attorneys' fees are appropriately awarded in this case.
In determining "reasonable" attorneys' fees, a lodestar amount is calculated from the product of a reasonable hourly rate and the number of hours reasonably expended by each attorney. Hensley v. Eckerhart, 461 U.S. 424, 437 (1983). In calculating the number of hours reasonably expended, a court should not reimburse "excessive, redundant or otherwise unnecessary" hours, or hours dedicated to severable unsuccessful claims. Id. at 434-35. However, fees may be awarded for unsuccessful claims when they are "inextricably intertwined" and "involve a common core of facts or are based on related legal theories." Reed v. A.W. Lawrence & Co., 95 F.3d 1170, 1183 (2d Cir. 1996).
Once calculated, the lodestar amount may be modified based on equitable "considerations that may lead the district court to adjust the fee upward or downward, including the important factor of the `results obtained.'" Hensley, 461 U.S. at 434 ().
Plaintiff seeks $425 per hour for Mr. Lewis, $375 per hour for Mr. Feinberg, $300 per hour for Mr. DeBofsky, and $325 per hour for Ms. de Toledo. Defendant challenges the reasonableness of Mr. Lewis' $425 hourly rate and Mr. Feinberg's $375 rate, arguing that the prevailing rate of ERISA litigators in Connecticut, rather than San Francisco Bay area, must be considered in assessing whether the rate charged is reasonable. As a general rule, a reasonable hourly rate should be "in line with those [rates] prevailing in the community for similar services by lawyers of reasonably comparable skill, experience, and reputation." Blum v. Stenson, 465 U.S. 886, 896 n. 11 (1984); accord Luciano v. Olsten Corp., 109 F.3d 111, 115 (2d Cir. 1997). However, the Second Circuit has recognized that exceptions to this general rule "have been made upon a showing that the special expertise of counsel from a different district is required." Polk v. New York State Dep't of Correctional Servs., 722 F.2d 23, 24 (2d Cir. 1983).
While the Court agrees that $425 per hour is high for Connecticut, the affidavits submitted by plaintiff's counsel have shown that they have a nationwide ERISA practice and some degree of special expertise is necessary for complex ERISA litigation. Accordingly, in light of the submissions of Attorneys Moukawsher, de Toledo and Tucci, the Court finds that Attorney Lewis should be compensated at $395 per hour and Attorney Feinberg at $350 per hour.4
Preliminarily, the Court observes that the claims at issue here involved...
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