Seitzman v. Sun Life Assurance Co. of Canada, Inc.

• Decision Date: 14 November 2002
• Docket Number: Docket No. 01-9142.
• Parties: Peter SEITZMAN, M.D., Plaintiff-Appellant-Cross Appellee, v. SUN LIFE ASSURANCE COMPANY OF CANADA, INC., Defendant-Appellee-Cross Appellant.
• Court: U.S. Court of Appeals — Second Circuit

311 F.3d 477

Peter SEITZMAN, M.D., Plaintiff-Appellant-Cross Appellee, v. SUN LIFE ASSURANCE COMPANY OF CANADA, INC., Defendant-Appellee-Cross Appellant.

Docket No. 01-9142.

United States Court of Appeals, Second Circuit.

Argued: June 24, 2002.

Decided: November 14, 2002.

COPYRIGHT MATERIAL OMITTED

Gregory Antollino, New York, NY, for Appellant-Cross-Appellee.

David K. Fiveson, Butler, Fitzgerald & Potter, New York, NY, for Appellee-Cross Appellant.

Before: JACOBS, LEVAL, KATZMANN, Circuit Judges.

JACOBS, Circuit Judge.

This appeal over attorneys' fees arises from a lawsuit under the Employee Retirement and Income Security Act of 1974 ("ERISA"), in which Plaintiff-Appellant Peter Seitzman, M.D., sought disability insurance benefits from Sun Life Assurance Company of Canada, Inc. ("Sun Life"). Dr. Seitzman claimed that he was totally disabled from working at his occupation as a practitioner of internal medicine because of medical problems, caused by the HIV virus and other illnesses, that included asthma, HIV-related diabetes, diarrhea, hypertension, peripheral neuropathy, and corresponding symptoms.

The United States District Court for the Southern District of New York (Preska, J.) found that Dr. Seitzman was not totally disabled under the terms of his disability insurance contract (as he asserted) because he was able to perform the substantial and material duties of his occupation on June 8, 1998 and for ninety days thereafter, and entered judgment dismissing the claim. This court affirmed that judgment by summary order, see Seitzman v. Sun Life Assur. Co. of Canada, 7 Fed. Appx. 89 (2d Cir.2001).

The district court thereafter entertained Sun Life's post-trial motion for attorneys' fees and costs pursuant to 29 U.S.C. § 1132(g)(1). The court found that Sun Life was entitled to fees and costs because: [1] Dr. Seitzman brought the underlying claim for disability benefits in bad faith, and the relative merits of the parties' positions weighed in favor of Sun Life; [2] a fee award to Sun Life would deter others from bringing similarly meritless claims; and [3] Dr. Seitzman could afford to satisfy an award of fees and costs. The amount of fees and costs claimed was found reasonable, but the court awarded Sun Life only half of that amount.

On appeal, Dr. Seitzman argues that the findings as to bad faith, lack of merit and deterrence amount to an abuse of discretion. Sun Life cross-appeals, challenging the fifty percent reduction. For the reasons set out below, we affirm as to the award of fees in the amount awarded.

BACKGROUND

In the underlying lawsuit, Dr. Seitzman claimed to have become totally disabled from doing his work, as a sole practitioner of internal medicine, by reason of various medical problems mostly related to HIV infection.

A review of the underlying facts is essential to an understanding of the issues concerning attorneys' fees. Unless otherwise noted, the facts set forth here are uncontested or as found by the district court in connection with the judgment that has already been affirmed, but because our affirmance was unpublished, we do not assume familiarity with it.

Dr. Seitzman diagnosed himself with the HIV infection in 1986, and beginning in 1989 he experienced symptoms or illnesses associated with this condition. In 1989 he was afflicted with diarrhea, which worsened in 1995. In 1994, he diagnosed himself with diabetes, and in 1997, peripheral neuropathy (resulting in foot pain). Dr. Seitzman testified that his health deteriorated in the mid- and late 1990s, but he relied primarily on himself for treatment until February 1998.

In December 1996, Dr. Seitzman sold his medical practice for $1.5 million to TPS of New York, Inc. ("TPS"), but agreed that he would continue the clinical duties of the practice as an employee of an affiliated company, Manhattan Medical Care, P.C. ("Manhattan") until approximately mid-June 1998, and would during that time help locate, hire and train a physician to replace him. In December 1996, Dr. Seitzman filled out a health questionnaire for TPS in connection with his new employment, in which he denied that he had trouble breathing, climbing stairs, or standing, denied that he suffered tremors or pain, and denied taking drugs that might affect his job performance.

An insurance contract (hereinafter the "Plan") issued to Dr. Seitzman's employer, TPS, entitled him to total disability benefits if, "because of Injury or Sickness, [he was] unable to perform the material and substantial duties of his own occupation."

In late November 1997, Dr. Patrick Dalton was hired to assume the clinical duties at the practice under an employment agreement stating that Dr. Seitzman's employment at the practice would end on or about June 15, 1998, and providing in essence that Dr. Dalton then would be a sole practitioner. Between January 1998 (when Dr. Dalton began work) and June 1998 (when Dr. Seitzman left), Dr. Seitzman's duties gradually shifted to Dr. Dalton. These duties included examining and treating patients; making hospital rounds; performing skin biopsies; treating warts, lesions and abscesses; and prescribing and administering medicine. Although Dr. Seitzman had previously performed spinal taps and drawn blood, spinal taps were no longer performed on-site and, pursuant to Dr. Dalton's employment contract (which entitled him to an additional staff person), the practice hired a phlebotomist to draw blood. The staff was notified in April that Dr. Seitzman would be leaving June 11, 1998. By May and early June of 1998, in anticipation of Dr. Seitzman's departure, Dr. Dalton was performing almost all of the clinical duties of the practice.

On June 8 — three days before Dr. Seitzman's scheduled departure — he suffered what he characterized as a "severe" asthma attack on his way to work. He went to his physician, Dr. Felder, who reported that though Dr. Seitzman was wheezing, his heart rate and blood pressure were normal. After leaving Dr. Felder's office, Dr. Seitzman advised his office by phone that he had become overwhelmed by medical problems and could not go back to his job.

On June 22, 1998, Seitzman filed a claim with Sun Life seeking a $10,000 monthly benefit for total disability allegedly commencing on June 8, 1998. According to the claim form, he had a hectic practice as a sole practitioner who worked seven days a week, with five days spent treating patients and making hospital rounds, and though he worked a full day on June 7, 1998, he was totally unable to work on June 8 because he suffered from HIV, diabetes, peripheral neuropathy, asthma, and depression. He expected never to return to work full-time or part-time.

Sun Life denied benefits in late 1998, and never rendered a decision on Dr. Seitzman's administrative appeal. Dr Seitzman sued, and the lawsuit proceeded to a bench trial before Judge Preska.

The evidence at trial was that Dr. Seitzman had various medical problems, including HIV infection, asthma, diabetes, diarrhea, hypertension, peripheral neuropathy, and depression, disorders which could cause (among other things) dizziness, fatigue, memory loss, foot pain and tremors. Dr. Seitzman testified that these symptoms and the side-effects of medication prevented him from performing the material functions of his occupation; that, for example, one drug caused memory loss and incoherence; and that among other things, he could no longer draw blood, take spinal taps, examine patients, make hospital rounds, render diagnoses, and administer medicine. Dr. Seitzman's expert witness (Dr. Brook) and his treating physician (Dr. Felder) opined that Dr. Seitzman could not perform the "material and substantial duties of his own occupation" by reason of his various illnesses and symptoms.

Dr. Dalton testified that prior to June 8, 1998, Dr. Seitzman did not complain about inability to work. Dr. Dalton had observed Dr. Seitzman draw blood, treat warts and lesions, and examine patients, all without evident physical difficulty. Dr. Dalton was unaware that Dr. Seitzman was ill until Dr. Seitzman failed to come in on June 8.

The long-time office manager in Dr. Seitzman's office, Virginia Speck, had worked daily with Dr. Seitzman in 1998. She confirmed that Dr. Seitzman did not complain about an inability to work until June 8, 1998. Between January and June of 1998, she observed no incapacity. Moreover, she had known at least before Dr. Dalton was hired in November 1997, that Dr. Seitzman wanted to retire by the middle of June 1998: he wanted to "enjoy life while he was feeling well," and "enjoy the fruits of what he had earned." Ms. Speck planned a surprise retirement party for Dr. Seitzman on June 10, 1998 — which he attended.

Notwithstanding Dr. Seitzman's claim on June 22, 1998 that he expected never to work again, he applied a month later for a job as a claims analyst for the State of New York. In the application, which was affirmed to be true under penalty of perjury, he falsely stated that he was self-employed as a physician-internist, and made no mention of the sale of his medical practice or his employment with Manhattan/TPS. In another employment application (also affirmed to be true), submitted in September 1998, Dr. Seitzman disclosed his employment with Manhattan/TPS but stated that he left because they "went bankrupt." Again, Dr. Seitzman referenced no disability.

TPS soon defaulted on payments under the contract of sale, and on August 20, 1998, Dr. Seitzman commenced an action to repossess his practice. In sworn pleadings filed with the Supreme Court, Dr. Seitzman claimed that he had "voluntarily terminated" his employment with Manhattan/TPS.

Dr. Seitzman started work as a claims analyst for New York State on September 17, 1998, and remained employed there at the time of trial in June 2000. According to Dr. Seitzman, although he could not perform his occupation as a treating physician because of his inability to concentrate or render...