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

• Court: U.S. District Court — Northern District of Illinois
• Writing for the Court: MATTHEW F. KENNELLY, District Judge.
• Citation: Pa. Chiropractic Ass'n v. Blue Cross Blue Shield Ass'n, 188 F.Supp.3d 776 (N.D. Ill. 2016)
• Decision Date: 23 May 2016
• Docket Number: No. 09 C 5619,09 C 5619
• Parties: Pennsylvania Chiropractic Association, et al., Plaintiffs, v. Blue Cross Blue Shield Association, et al., Defendants.

188 F.Supp.3d 776

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 May 23, 2016

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, ScottScott 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, McDermott, Will & Emery LLP, John Friedrich Zabriskie, Rebecca R. Hanson, Foley & Lardner, Chicago, IL, Michael M. Conway, Glencoe, IL, for Defendants.

MEMORANDUM OPINION AND ORDER

MATTHEW F. KENNELLY, District Judge.

In November 2013, the Court granted partial summary judgment on the issue of liability to two Pennsylvania chiropractors, Barry Wahner and Mark Barnard, on their claims against Independence Blue Cross (IBC).¹ See Pa. Chiropractic Ass'n v. Blue Cross Blue Shield Ass'n , 4 F.Supp.3d 929 (N.D.Ill.2013). Barnard and Wahner, among several other plaintiffs including the Pennsylvania Chiropractic Association (PCA), had sued Independence and others for violations of the Employee Retirement Income Security Act (ERISA). After the Court's decision on summary judgment, Barnard and Wahner settled their individual claims, leaving for trial only PCA's claims against IBC. The Court held a bench trial on PCA's claims. The Court found in favor of PCA, see Pa. Chiropractic Ass'n v. Blue Cross Blue Shield Ass'n , No. 09 C 5619, 2014 WL 1276585 (N.D.Ill. Mar. 28, 2014), and subsequently granted it a permanent injunction against IBC, requiring it to reform its notice and comment procedures when issuing repayment demands to PCA members. See Pa. Chiropractic Ass'n v. Blue Cross Blue Shield Ass'n , No. 09 C 5619, 2014 WL 2069343 (N.D.Ill. May 19, 2014). The Court later approved injunctions requested by Barnard and Wahner as well, see Pa. Chiropractic Ass'n v. Blue Cross Blue Shield Ass'n , No. 09 C 5619, 2014 WL 4087221 (N.D.Ill. Aug. 19, 2014), and awarded attorneys' fees and costs to PCA, Barnard, and Wahner, see Pa. Chiropractic Ass'n v. Blue Cross Blue Shield Ass'n , 76 F.Supp.3d 722 (N.D.Ill.2014).

In November 2015, the court of appeals reversed this Court's decisions finding liability, granting the injunctions, and awarding attorneys' fees to the plaintiffs. IBC has now moved for attorneys' fees and costs pursuant to 29 U.S.C. § 1132(g)(1). In response, plaintiffs have moved for discovery sanctions against IBC. For the reasons stated below, the Court denies both parties' motions.

Background

The Court assumes familiarity with the previous orders in this case. In short, associations representing the interests of individual chiropractors sued Blue Cross Blue Shield Association and a number of Blue Cross Blue Shield entities for violations of ERISA. Plaintiffs alleged that the Blue Cross defendants had a practice of initially reimbursing them for medical services they provided to Blue Cross insureds, only to later make false or fraudulent determinations that the payments had been made in error. The Blue Cross entities would then demand immediate repayment from plaintiffs and would forcibly recoup the amounts they sought by withholding payment on other, unrelated claims for services plaintiffs provided to other Blue Cross insureds. Plaintiffs further alleged that when the Blue Cross entities made these repayment demands, they typically failed to provide adequate explanations for their demands or reasonable procedures for challenging them. Plaintiffs brought claims under section 502(a)(1)(B) of ERISA, which permits a plan participant or beneficiary to bring a civil action "to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan," 29 U.S.C. § 1132(a)(1)(B), and section 502(a)(3), which authorizes a plan participant, beneficiary, or fiduciary to bring a civil action "(A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan," id. § 1132(a)(3).

The Court determined that plaintiffs were "beneficiaries" who could bring claims against the defendants under sections 502(a)(1)(B) and 502(a)(3). Many other plaintiffs and defendants settled out of the case. Following a bench trial in 2013, the Court awarded damages and injunctions requiring IBC to follow ERISA and Department of Labor regulations when making future decisions concerning coverage and level of payment under insurance policies. Plaintiffs then petitioned for attorneys' fees and costs pursuant to ERISA's fee-shifting provision, 29 U.S.C. § 1132(g)(1), which the Court awarded to plaintiffs.

On appeal, IBC argued (among other things) that plaintiffs failed to prove their case because they never introduced into evidence an ERISA plan whose terms could be enforced or clarified through a civil action under section 502(a)(1)(B) or section 502(a)(3). The Seventh Circuit agreed. It held that "a ‘beneficiary’ is a person designated ‘by a participant’ or ‘by the terms of an employee benefit plan,’ and plaintiffs are neither." Pa. Chiropractic Ass'n v. Independence Hosp. Indemnity Plan, Inc. , 802 F.3d 926, 928 (7th Cir.2015) (quoting 29 U.S.C. § 1002 ). The court noted that under Kennedy v. Connecticut General Life Insurance Co. , 924 F.2d 698 (7th Cir.1991), a provider is a "beneficiary" under ERISA when a "participant" assigns to the provider the right to receive the participant's entitlements under an ERISA plan. But, the court said, the plaintiffs in this case "[did] not rely on a valid assignment from any patient. Nor [did] they rely on a designation in a plan. Instead they rel[ied] on their contracts with an insurer. That does not meet the definition in § 1002(8)." Pa. Chiropractic Ass'n , 802 F.3d at 928. For this reason, the Seventh Circuit reversed, stating that "[t]he damages and injunctions...must be vacated, and the award of attorneys' fees to plaintiffs falls with them." Id. at 930.

When the parties returned to this Court, IBC moved for an award of attorneys' fees and costs pursuant to ERISA's fee-shifting provision, 29 U.S.C. § 1132(g)(1). Plaintiffs opposed IBC's motion and filed a motion of their own seeking monetary sanctions against IBC for allegedly committing discovery violations before this Court that led to IBC's victory on appeal. Specifically, plaintiffs contend that IBC should be sanctioned because it had possession, custody, or control over the ERISA plan documents governing their insureds' employers' benefit plans, yet IBC never produced (and still has not produced) those documents.

Discussion

A. IBC's motion for attorneys' fees and costs

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). IBC is eligible for fees because it prevailed on appeal.

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). This presumption, however, is weaker in cases in which a prevailing defendant seeks fees from a losing plaintiff. See Marquardt v. N. Am. Car Corp. , 652 F.2d 715, 720 (7th Cir.1981). The Seventh Circuit recognizes two tests that courts may use to determine whether to award fees. Temme v. Bemis Co. , 762 F.3d 544, 550 (7th Cir.2014). One test instructs that an award of 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). The other test instructs a court to consider:

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). "[B]oth tests essentially ask the same question: was the losing party's position substantially justified and taken in good faith, or was that party simply out to harass its opponent?" Id. at 506 (internal quotation marks omitted).

IBC contends that plaintiffs' litigating position was not substantially justified and that every one of the factors under the Seventh Circuit's five-factor test tilts in IBC's favor. First, IBC contends that plaintiffs are culpable, censurable, and...