Parke v. First Reliance Standard Life Ins. Co.

• Decision Date: 24 May 2004
• Docket Number: No. 03-1294.,No. 03-1437.,03-1294.,03-1437.
• Citation: 368 F.3d 999
• Court: U.S. Court of Appeals — Eighth Circuit
• Parties: Julie PARKE, Plaintiff — Appellee, v. FIRST RELIANCE STANDARD LIFE INSURANCE COMPANY, Defendant — Appellant. Julie Parke, Plaintiff — Appellant, v. First Reliance Standard Life Insurance Company, Defendant — Appellee.

368 F.3d 999

Julie PARKE, Plaintiff — Appellee, v. FIRST RELIANCE STANDARD LIFE INSURANCE COMPANY, Defendant — Appellant.

Julie Parke, Plaintiff — Appellant, v. First Reliance Standard Life Insurance Company, Defendant — Appellee.

No. 03-1294.

No. 03-1437.

United States Court of Appeals, Eighth Circuit.

Submitted: December 15, 2003.

Filed: May 24, 2004.

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Joshua Bachrach, argued, Philadelphia, PA, for appellant.

Mark Murray Nolan, argued, St. Paul, MN, for appellee.

Before WOLLMAN, JOHN R. GIBSON, and RILEY, Circuit Judges.

JOHN R. GIBSON, Circuit Judge.

The district court held that First Reliance Standard Life Insurance Company was liable to Julie Parke under the Employment Retirement Income Security Act of 1974, or ERISA, for prejudgment interest during the period in which Parke's benefits were wrongfully delayed. The district court denied Parke's request for certification of a class but awarded her attorney's fees.¹ Both parties appeal portions of the district court's order and judgment. First Reliance argues: 1) the district court erred in awarding prejudgment interest to Parke based on First Reliance's delay in starting payments; 2) the district court erred in awarding Parke the attorney's fees she incurred during administrative review proceedings related to her claim; and 3) the district court erred in awarding Parke approximately $96,000 in attorney's fees. For her part, Parke appeals two issues²: 1) the district court's denial of class certification; and 2) the district court's decision to allow First Reliance to offset the gross, rather than net, social security benefits Parke received in calculating her benefits. We affirm the district court in all respects except its award of attorney's fees incurred during Parke's administrative review proceedings, which we reverse.

FACTS

Julie Parke suffers from insulin-dependent diabetes and a variety of severe diabetic complications. In 1998, these ailments forced her to resign from her position as an account executive with Petry Media Corporation. She subsequently applied for long-term disability benefits from First Reliance Standard Life Insurance Company, which provided such benefits to Petry employees under a group policy. First Reliance denied her claim on November 6, 1998, because it concluded that her job was "sedentary" and could be performed despite her health problems. Parke, with the help of counsel, requested administrative review of this denial on February 3, 1999.

First Reliance reversed its decision on June 4, 1999, and retroactively awarded Parke long-term disability benefits through January 30, 1999. However, First Reliance suspended ongoing benefits to Parke because it contended that Parke had not submitted adequate medical records to demonstrate the permanent nature of her disability. Parke filed this action on July 7, 1999, seeking in part to force First Reliance to reinstate her benefits. On October 14, 1999, First Reliance voluntarily reinstated Parke's benefits, effective retroactively to February 1, 1999.

The reinstatement of benefits did not completely resolve the dispute. Parke asserted that she was entitled to interest and attorney's fees in connection with her efforts to have her benefits resumed. She also claimed that First Reliance had incorrectly calculated an offset under the policy for Parke's social security benefits. She moved for certification of her complaint as a class action, and both parties filed cross motions for summary judgment. The district court denied all three motions.

Parke's claims ultimately were tried to the district court. The district court determined that: Parke is entitled to interest during the time her benefits were denied and suspended in violation of First Reliance's fiduciary duty; First Reliance correctly calculated the social security offset; and Parke is entitled to attorney's fees and costs. The district court awarded more than $96,000 in attorney's fees, which included fees incurred by Parke during the administrative proceedings. The parties appeal most aspects of the district court's order.

I.

Parke argues that the district court erred by denying her motion for class certification insofar as it sought injunctive relief for other members of the putative class. Parke sought an order enjoining First Reliance from suspending or terminating long-term disability benefits of a claimant until after it receives evidence that the claimant is no longer disabled or until after the claimant unreasonably refuses to provide current evidence of disability. In essence, Parke's claim is that First Reliance engages in a practice of awarding long-term disability benefits to a claimant, then terminating or suspending those benefits without asking for or receiving evidence that the claimant's condition has changed.

Parke may sue on behalf of a class only if she meets four threshold requirements: 1) the class is so numerous that joinder of all members is impracticable; 2) there are questions of law or fact common to the class; 3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and 4) the representative parties will fairly and adequately protect the interests of the class. Fed.R.Civ.P. 23(a) (2003). If these four requirements are met, Parke still must satisfy at least one of the requirements contained in Fed.R.Civ.P. 23(b). The district court denied the motion for class certification because it concluded that Parke could not meet the threshold requirement of typicality. The district court determined that the Petry Media disability plan permits First Reliance to terminate benefits prior to receiving proof that the claimant's disability status has changed. Thus, even if First Reliance had breached its duties under the plan in the particular context of Parke's claim, the propriety of terminating any other claimant's benefits remains dependent on the facts of the individual case and the terms of any other disability plans under which First Reliance may review claims.³

We review a district court's denial of class certification for abuse of discretion. Owner-Operator Indep. Drivers Ass'n, Inc. v. New Prime, Inc., 339 F.3d 1001, 1011 (8th Cir.2003), cert. denied, ___ U.S. ___, 124 S.Ct. 1878, 158 L.Ed.2d 467 (2004). The record shows that the district court did not abuse its discretion by refusing to certify a class for injunctive relief. The Petry Media plan states that "monthly benefits are terminated on the earliest of ... 2) the date the Insured ceases to meet the Eligibility Requirements." To be eligible for benefits, a claimant must provide medical documentation showing that the claimant is totally disabled. However, the evidence of total disability is not always sufficient to show that the disability is permanent or long-term. Thus, while Parke may be correct in her argument that First Reliance's termination of benefits before asking for or receiving updated medical records would often constitute a breach of First Reliance's obligations, the question of whether a breach occurred remains a case-by-case determination. See Holmes v. Pension Plan of Bethlehem Steel Corp., 213 F.3d 124, 137-38 (3d Cir.2000) (affirming district court's denial of class certification for class of beneficiaries whose benefits were wrongfully delayed because "the issue of liability itself requires an individualized inquiry into the equities of each claim."). Moreover, although the district court never directly considered the merits of the injunction request itself, Parke's lawsuit itself suggests the adequacy of remedies at law. See United States v. Grand Labs., Inc., 174 F.3d 960, 965 (8th Cir.1999) ("Injunctive relief is generally appropriate when there is no adequate remedy at law. Probably the most common method of demonstrating that a legal remedy is inadequate is by showing that irreparable harm will result.") (internal citations and quotation omitted).

III.

Parke argues that the district court erred in calculating the extent to which the social security benefits she receives reduce her monthly benefits from First Reliance. Parke's disability policy obligates First Reliance to provide her with 60% of her pre-disability earnings. However, the policy also contains an integration provision allowing First Reliance to reduce the amount payable to Parke each month by the amount of benefits she receives from other defined sources:

OTHER INCOME BENEFITS: Other Income Benefits are benefits resulting from the same Total Disability for which a Monthly Benefit is payable under this Policy. These Other Income Benefits are:

* * * * * *

(7) disability or Retirement Benefits under the United States Social Security Act ... for which:

(a) an Insured is eligible to receive because of his/her Total Disability.

Parke does not contest First Reliance's right to reduce her disability benefits as a result of her social security benefits, but she does dispute the amount of the offset.

The parties agree that Parke is entitled to $1,500 per month in gross social security benefits. However, she elected to have taxes withheld on these benefits, and therefore receives net benefits of only $1,123.30 each month.⁴ First Reliance nonetheless offset its obligation to her by $1,500 because it concluded that she was "eligible to receive" the full $1,500 each month. The district court denied Parke's claim to modify the offset.

Because First Reliance has discretionary authority under the policy to determine eligibility for benefits, we review its decision for an abuse of discretion. See Woo v. Deluxe Corp., 144 F.3d 1157, 1160 (8th Cir.1998).

We conclude that First Reliance did not abuse its discretion in offsetting its obligation to Parke by the full $1,500 each month. The policy permits First Reliance to offset its obligation by the amount of social security benefits Parke is "eligible to receive." Although Parke elected to have taxes withheld...