Pa. Chiropractic Ass'n v. Blue Cross Blue Shield Ass'n

• Decision Date: 17 December 2014
• Docket Number: No. 09 C 5619,09 C 5619
• Citation: 76 F.Supp.3d 722
• Parties: Pennsylvania Chiropractic Association, et al., Plaintiffs, v. Blue Cross Blue Shield Association, et al., Defendants.
• Court: U.S. District Court — Northern District of Illinois

76 F.Supp.3d 722

Pennsylvania Chiropractic Association, et al., Plaintiffs

v.Blue Cross Blue Shield Association, et al., Defendants.

No. 09 C 5619

United States District Court, N.D. Illinois, Eastern Division.

Signed December 17, 2014

Jason S. Cowart, D. Brian Hufford, Zuckerman Spaeder LLP, Joseph P. Guglielmo, Scott & Scott LLP, Robert J. Axelrod, Axelrod & Dean LLP, New York, NY, Anthony F. Maul, The Maul Firm, P.C., Brooklyn, NY, Christopher M. Burke, Scott & Scott LLP, San Diego, CA, David W. Stanley, Cuneo, Waldman & Gilbert, LLP, Washington, DC, John William Leardi, Paul Donald Werner, Buttaci & Leardi, LLC, Vincent N. Buttaci, Taylor, Colicchio & Silverman, LLP, Princeton, NJ, Kimberly A. Driggers, Brooks, Leboeuf, Bennett, Foster & Gwartney, P.A., Tallahassee, FL, Leigh Handelman Smollar, Louis Carey Ludwig, Patrick Vincent Dahlstrom, Pomerantz LLP, Chicago, IL, Patrick J. Sheehan, Whatley Drake & Kallas, LLC, Boston, MA, for Plaintiffs.

Amy Graham Doehring, Bryan Matthew Webster, John Andrew Litwinski, Michael A. Pope, Christopher MacNeil Murphy, Elizabeth Brooke Herrington, McDermott, Will & Emery LLP, John Friedrich Zabriskie, Michael M. Conway, Rebecca R. Hanson, Foley & Lardner, Charles Clark Jackson, Charis A. Runnels, Deborah S. Davidson, Erin Eveleen McAdams, Jay H. Calvert, Jr., Kirsten Ann Milton, Stephanie L. Sweitzer, Morgan Lewis & Bockius, LLP, Marie Ann Halpin, Chicago, IL, Anthony F Shelley, Timothy P. O'Toole, Miller & Chevalier Chartered, Washington, DC, Joseph A. Fink, Dickinson Wright PLLC, Lansing, MI, Patrick B. Green, Dickinson Wright PLLC, Detroit, MI, for Defendants.

MEMORANDUM OPINION AND ORDER

MATTHEW F. KENNELLY, District Judge:

Plaintiffs Pennsylvania Chiropractic Association (PCA), Mark Barnard, D.C. (Barnard), and Barry Wahner, D.C. (Wahner) have moved for an award of attorney's fees and costs against defendant Independence Blue Cross¹ (IBC) pursuant to 29 U.S.C. § 1132(g)(1). For the reasons stated below, the Court grants plaintiffs' motion for fees and costs but reduces the requested fee award and directs the parties to confer and quantify the reductions ordered.

Background

The Court assumes familiarity with the previous orders in this case. As an overview, associations representing the interests of individual chiropractors sued Blue Cross and Blue Shield Association and a number of Blue Cross Blue Shield entities for violations of the Employee Retirement Income Security Act (ERISA). Following the Court's 2013 rulings on the parties' motions for summary judgment, nearly all of the remaining claims were settled. What remained were PCA's injunctive relief claims against IBC and the claims against IBC of two individual plaintiffs, Barry Wahner and Mark Barnard, to whom the Court had granted summary judgment on the issue of liability.

After a bench trial on PCA's injunctive relief claims, the Court found in favor of PCA. PCA claimed that IBC unlawfully recouped payments it had previously made to its members. IBC withheld payments for authorized services in order to account for a claimed computer glitch that resulted in overpayments to certain providers. Providers received notice in the form of a letter stating that overpayments had been made, but the notice did not identify the particular services at issue. In certain cases, IBC began recouping payments without giving providers reasons for the recoupments or information about their rights to appeal. Providers who attempted to pursue an appeal through IBC's general appeals process were not provided with adequate information concerning the outcome of the review or the evidence that was reviewed in reaching the decision, and there was no real opportunity for providers to participate in any appeals.

After the bench trial, the Court found in favor of PCA on its ERISA claims, finding that PCA members were beneficiaries for purposes of ERISA because IBC paid benefits directly to them for the services they rendered to insureds. In the alternative, the Court held that PCA members were ERISA beneficiaries because patients had assigned their rights to receive benefits to PCA providers. The Court determined that IBC did not provide adequate notice and appeal procedures for providers to challenge the recoupment of paid benefits as required under ERISA.

On May 19, 2014, the Court issued a permanent injunction requiring IBC to provide ERISA-compliant notice and appeal procedures to PCA members when it seeks recoupment of a benefit.

The Court later ruled on the matter of the appropriate relief for Wahner and Barnard, who had obtained summary judgment on the issue of liability. The Court found they were entitled to an injunction as well as monetary relief arising from wrongful recoupments of benefit payments. The injunction, which the Court issued on September 4, 2014, required IBC to provide Wahner and Barnard with ERISA-compliant notice and appeal procedures. The Court recently stayed the injunctions pending the resolution of IBC's appeal by the Seventh Circuit.

PCA, Barnard, and Wahner have now moved for attorney's fees and expenses pursuant to 29 U.S.C. § 1132(g)(1). Plaintiffs have filed two separate requests in this case. On July 2, 2014, plaintiffs moved for fees and expenses incurred from the initiation of the litigation through May 31, 2014. On September 18, 2014, plaintiffs filed a supplemental motion requesting fees and expenses incurred from June 1, 2014 through September 18, 2014.

Discussion

A. Appropriateness of a fee award

Under ERISA's fee-shifting provision, a court has discretion to award fees and costs to either party. The statute provides that in actions brought “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). To be awarded fees, a party must achieve “some degree of success on the merits.” Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242, 255, 130 S.Ct. 2149, 176 L.Ed.2d 998 (2010). PCA, Barnard, and Wahner are eligible for fees because they prevailed on summary judgment and at trial.

In ERISA cases, “there is a modest presumption in favor of awarding fees to the prevailing party, but that presumption may be rebutted.” Stark v. PPM Am., Inc., 354 F.3d 666, 673 (7th Cir.2004) (internal quotation marks omitted). The Seventh Circuit recognizes two tests that courts may use to determine whether to award fees. Although there has been some discussion about whether the Supreme Court's decision in Hardt “does away with our two tests,” the Seventh Circuit has not expressly rejected the tests. Temme v. Bemis Co., 762 F.3d 544, 550 (7th Cir.2014).

One test instructs that fees may be denied if the losing party's position was “substantially justified,” which means “something more than non-frivolous, but something less than meritorious—and taken in good faith.” Jackman Fin. Corp. v. Humana Ins. Co., 641 F.3d 860, 866 (7th Cir.2011). Under the other test, the court considers:

1) the degree of the offending parties' culpability or bad faith; 2) the degree of the ability of the offending parties to satisfy personally an award of attorney's fees; 3) whether or not an award of attorney's fees against the offending parties would deter other persons acting under similar circumstances; 4) the amount of benefit conferred on members of the [ ] plan as a whole; and 5) the relative merits of the parties' positions.

Kolbe & Kolbe Health & Welfare Benefit Plan v. Med. Coll. of Wis., Inc., 657 F.3d 496, 505–06 (7th Cir.2011) (internal quotation marks omitted). The five-factor test is useful in cases like this one in which the plaintiff prevailed. See Pasternak v. Radek, No. 07 C 2858, 2008 WL 2788551, at *2 (N.D.Ill. Apr. 3, 2008), op. clarified on den. of recons. , No. 07 C 2858, 2008 WL 2788547 (N.D.Ill. Apr. 24, 2008). “[B]oth tests essentially ask the same question: was the losing party's position substantially justified and taken in good faith.” Kolbe, 657 F.3d at 506 (internal quotation marks omitted). A finding of bad faith or harassment is not necessary to award attorney's fees under ERISA. See Loomis v. Exelon Corp. , 658 F.3d 667, 675 (7th Cir.2011).

With respect to the substantially justified test, the Seventh Circuit recently clarified that the “relevant ‘substantiality’ inquiry should be into a party's posture during the case as a whole,” including the non-moving party's “pre litigation behavior.” Temme, 762 F.3d at 551. In Tem me, the plaintiff class sued Bemis Company for eliminating health care benefits. Although the district court granted summary judgment in favor of Bemis (the defendant), the Seventh Circuit reversed. After the case settled before trial, the plaintiffs were awarded fees. In affirming the fee award, the Seventh Circuit rejected Bemis's argument that its position was substantially justified because it had initially obtained summary judgment. Id. at 550. In Temme, Bemis continued to deny a benefit to which plaintiffs “were clearly entitled” based on the Seventh Circuit's ruling in their favor. Id. at 551. Temme instructs courts to look at the losing party's actions prior to the litigation and throughout the litigation.

As in Temme, IBC has persistently denied benefits to which the plaintiffs were entitled. IBC contends that it was substantially justified because the Court's decision that PCA members were ERISA beneficiaries because they were designated by employee benefit plans to receive benefits was novel. Even if this is so, that was only one route to the Court's determination that plaintiffs were beneficiaries with rights under ERISA.

IBC was not substantially justified in arguing that it was under no obligation to provide ERISA-compliant procedures to providers. IBC steadfastly contended throughout the litigation that the plaintiff healthcare providers did not have ERISA standing, despite Seventh Circuit case law stating that section 1132(a)(1)(B) of ERISA “supplies jurisdiction when a provider of...