Mardirossian v. Guardian Life Ins. Co. of America

• Decision Date: 18 October 2006
• Docket Number: No. CV 05-02871 MMMJCX.,CV 05-02871 MMMJCX.
• Citation: 457 F.Supp.2d 1038
• Parties: Robert MARDIROSSIAN, Plaintiff, v. The GUARDIAN LIFE INSURANCE COMPANY OF AMERICA; Hirsch Pipe and Supply Co., Inc. Long Term Disability Plan; Hirsch Pipe and Supply Co., Inc. Medical Plan; Hirsch Pipe and Supply Co., Inc. Life Insurance Plan; Hirsch Pipe and Supply Co., Inc. Pension/Retirement Plan, Defendants.
• Court: U.S. District Court — Central District of California

457 F.Supp.2d 1038

Robert MARDIROSSIAN, Plaintiff, v. The GUARDIAN LIFE INSURANCE COMPANY OF AMERICA; Hirsch Pipe and Supply Co., Inc. Long Term Disability Plan; Hirsch Pipe and Supply Co., Inc. Medical Plan; Hirsch Pipe and Supply Co., Inc. Life Insurance Plan; Hirsch Pipe and Supply Co., Inc. Pension/Retirement Plan, Defendants.

No. CV 05-02871 MMMJCX.

United States District Court, C.D. California.

October 18, 2006.

COPYRIGHT MATERIAL OMITTED

Glenn R. Kantor, Kantor & Kantor, Northridge, CA, for Plaintiff.

Daniel W. Maguire, Edith S. Shea, Galton & Helm, Los Angeles, CA, for Defendant.

ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR ATTORNEYS' FEES

MORROW, District Judge.

I. FACTUAL AND PROCEDURAL BACKGROUND

On April 19, 2005, plaintiff Robert Mardirossian filed this action against The Guardian Life Insurance Company of America, Hirsch Pipe and Supply Co., Inc. Long Term Disability Plan, Hirsch Pipe and Supply Co., Inc. Medical Plan, Hirsch Pipe and Supply Co., Inc. Life Insurance Plan, and Hirsch Pipe and Supply Co., Inc. Pension/Retirement Plan.¹ Mardirossian challenged the denial of his claim for longterm disability ("LTD") benefits under an employee benefit plan established by Hirsch Pipe and Supply Company, Inc. He invoked federal jurisdiction under the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. ("ERISA").

Guardian based its denial of Mardirossian's claim on his failure to notify it of his disability within twenty days, as required by the plan.² Mardirossian acknowledged that he had not provided notice until December 23, 2003, more than a year after he first experienced back pain.³ He argued, however, that Guardian should have considered his claim on the merits because his late notice did not prejudice its ability to investigate the claim.⁴ Under California's notice-prejudice rule, an insurance company may not avoid liability on the basis of untimely notice unless it proves that it has been actually and substantially prejudiced by the delay. See Cisneros v. UNUM Life Ins. Co. of America, 134 F.3d 939, 944 (9th Cir.1998); Shell Oil Co. v. Winterthur Siviss Ins. Co., 12 Cal.App.4th 715, 760-61, 15 Cal.Rptr.2d 815 (1993).

On June 6, 2006, the court denied Guardian's motion for summary judgment and sua sponte entered summary judgment in Mardirossian's favor. The court found that Guardian had abused its discretion in denying Mardirossian's LTD claim on the basis of late notice and proof of loss, because it did not document that it suffered actual prejudice as a result of the late notice.⁵ Accordingly, the court remanded the claim to Guardian for reconsideration.

Mardirossian has now moved for an interim award of attorneys' fees. Pursuant to Rule 78 of the Federal Rules of Civil Procedure and Local Rule 7-15, the court finds this matter suitable for decision without oral argument.

II. DISCUSSION

A. Legal Standard Governing Attorneys' Fees Awards Under 29 U.S.C. § 1132(g)

In any action brought by a plan participant, beneficiary, or fiduciary 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). Interpreting this statute, the Ninth Circuit has held that a successful ERISA participant who "prevails in his suit ... to enforce his rights under his plan should ordinarily recover an attorney's fee unless special circumstances would render such an award unjust." Smith v. CMTA-IAM Pension Trust, 746 F.2d 587, 589 (9th Cir.1984); see also McElwaine v. U.S. West, Inc., 176 F.3d 1167, 1172 (9th Cir.1999) (detailing the "special circumstances rule").⁶

1. Whether Mardirossian Is A Prevailing Party

"As a general rule," ERISA plaintiffs are entitled to an award of attorneys' fees "if they succeed on any significant issue in litigation which achieves some of the benefit the parties sought in bringing the suit." Smith, 746 F.2d at 589 (quoting Hensley v. Eckerhart, 461 U.S. 424, 433, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983)). ERISA plaintiffs may also obtain interim fees by prevailing on the merits of at least some of their claims. Frei v. Hartford Life Ins. Co., No. C-05-01191 EDL, 2006 WL 1409360, *1 (N.D.Cal. May 23, 2006) (citing Kayes v. Pacific Lumber Co., 51 F.3d 1449, 1468-69 n. 15 (9th Cir. 1995) ("We hold that interim attorney's fees are available under ERISA to the extent that they are available under civil rights statutes")); see also Hanrahan v. Hampton, 446 U.S. 754, 758, 100 S.Ct. 1987, 64 L.Ed.2d 670 (1980) (per curiam) (holding that in enacting 42 U.S.C. § 1988, "Congress intended to permit the interim award of counsel fees only when a party has prevailed on the merits of at least some of his claims"). A "prevailing party" is one that achieves "a material alteration of the legal relationship of the parties." Frei 2006 WL 1409360 at *1 (quoting Buckhannon Bd. & Care Home, Inc. v. West Virginia Dep't of Health & Human Resources, 532 U.S. 598, 604, 121 S.Ct. 1835, 149 L.Ed.2d 855 (2001)).⁷

Relying on Flanagan v. Inland Empire Electrical Workers Pension Plan & Trust, 3 F.3d 1246 (9th Cir.1993), Guardian argues that Mardirossian is not entitled to interim fees because he has not established a right to benefits or shown that Guardian violated ERISA. In Flanagan, the Ninth Circuit held that plaintiffs had standing to sue as "affected participants" under a plan and remanded the case to district court for further consideration. Id. at 1253-54. The court declined to award attorneys' fees upon remand, concluding that an award would be premature because plaintiffs had "not established a right to benefits nor shown that the Plan or its fiduciaries ... violated ERISA." Id. at 1253. See also Saffle v. Sierra Pacific Power Co. Long Term Disability Income Plan, 85 F.3d 455, 460-61 (9th Cir.1996) (reversing the district court's order to pay benefits, directing that the court remand to the administrator for further consideration, and declining to award fees on appeal as "premature"); Patterson v. Hughes Aircraft Co., 11 F.3d 948, 951 n. 4 (9th Cir. 1993) (ordering the district court to remand a benefits claim to the plan for reconsideration and summarily declining to award fees on appeal).

Here, unlike Flanagan, the court has expressly found that Guardian violated ERISA. In its June 6, 2006 order, the court concluded that Guardian abused its discretion in denying Mardirossian's claim.⁸ See Frei, 2006 WL 1409360 at *3 (finding that plan administrators had abused their discretion and thus violated ERISA by applying an incorrect definition of "total disability" and that plaintiff was therefore entitled to interim fees). As a result, Mardirossian is more like the plaintiff in White v. Jacobs Engineering Group Long Term Disability Benefit Plan, 896 F.2d 344 (9th Cir.1989), than the plaintiff in Flanagan. In White, the Ninth Circuit reversed the district court's entry of summary judgment in favor of defendant on the ground that plaintiff had not timely exhausted his administrative remedies. Id. at 352. The court held that the benefits termination notice the plan sent to plaintiff was not sufficiently specific to trigger the running of the 60-day period for appeal. Id. at 350. As a result, it ordered the district court to remand the claim to the plan for further consideration, and awarded interim fees to plaintiff because he had prevailed on a significant issue. Id. at 352.

Guardian contends that the court's determination that it abused its discretion by denying the claim on the basis of late notice does not constitute a finding that it violated ERISA. Specifically, it asserts, in determining that remand was appropriate, the court applied principles of California law, not ERISA law. This argument is unavailing. Under Supreme Court precedent, a state notice-prejudice rule is effectively deemed to be term of the ERISA insurance contract. See UNUM Life. Ins. Co. v. Ward, 526 U.S. 358, 376, 119 S.Ct. 1380, 143 L.Ed.2d 462 (1999) ("We have repeatedly held that state laws mandating insurance contract terms are saved from preemption under § 1144(b)(2)(A). Under [UNUM's] interpretation of § 1104(a)(1)(D), however, States would be powerless to alter the terms of the insurance relationship in ERISA plans; insurers could displace any state regulation simply by inserting a contrary term in plan documents. This interpretation would virtually rea[d] the saving clause out of ERISA" (internal quotation marks and citations omitted)); Anderson v. Continental Casualty Co., 258 F.Supp.2d 1127, 1130 (E.D.Cal.2003) ("State law may provide the rule of decision in ERISA cases if it is covered by the saving clause," citing Ward).

Stated differently, California's notice-prejudice rule is incorporated into Mardirossian's ERISA contract by operation of law. Thus, by finding that Guardian violated California's notice-prejudice rule, the court implicitly found that Guardian violated the terms of the ERISA contract. As Guardian acknowledges, a finding that the plan violated ERISA warrants an award of reasonable attorneys' fees. Compare Frei, 2006 WL 1409360 at *3 (finding that an interim fee award was appropriate because the plan violated ERISA) with Flanagan, 3 F.3d at 1253 (concluding that a fee award was not appropriate because plaintiff had "not established a right to benefits, nor shown that the Plan or its fiduciaries ... violated ERISA")

Moreover, by holding that Guardian abused its discretion, the court "altered the legal relationship of the parties in that [Guardian] is now under court order to reconsider [Mardirossian's] disability benefits claim in accordance with the remand order." Frei 2006 WL 1409360 at *2. For this reason, it is clear that Mardirossian succeeded on a significant issue in the litigation, i.e. establishing that Guardian's benefits determination violated ERISA. He also achieved part of the relief he sought, i.e. a redetermination his...