12 Fla. L. Weekly Supp. 470a
Employee Retirement Income Security Act — Disability insurance — Attorney’s fees — Interest — Federal preemption — Motion for rehearing of final judgment awarding interest and attorney’s fees to prevailing claimant in action for review of denial of disability income benefits is denied — Where both issue of prejudgment interest and attorney’s fees clearly relate to ERISA plan ERISA preempts application of state law as to both issues — Where claimant has been denied use of funds for ten years due to administrator’s improper denial of benefits, failure to award prejudgment interest on sums due would clearly fall short of making claimant whole, and court exercises discretion to award interest — Where administrator’s vocational review of claimant’s capabilities following termination of benefits was fatally flawed by mischaracterization of her position, insurer has ability to satisfy fee award, fee award will deter insurer and others from acting arbitrarily in characterization of claimants’ jobs, claimant is seeking to benefit only herself and not all participants of plan and there are no strikingly significant legal questions regarding ERISA present in case, and administrator’s position in case is without merit, award of attorney’s fees is supported by evidence and law even though final judgment’s rationale for awarding fees on basis that claimant was prevailing party may not have been proper under ERISA
NANCY BARNES HOLT, Plaintiff, vs. UNUM LIFE INSURANCE COMPANY OF AMERICA, Defendant. Circuit Court, 18th Judicial Circuit in and for Brevard County. Case No. 05-1995-CA-017536-XXXX-XX. February 3, 2005. T. Mitchell Barlow, Judge. Counsel: Robert J. Telfer, Jr. Wendy L. Furman.
ORDER ON REHEARING OF ISSUES OF INTEREST AND ATTORNEY’S FEES
[Original Opinion at 12 Fla. L. Weekly Supp. 468a]
THIS CASE came before the Court on October 20, 2004 for rehearing as to the issues of interest and attorney’s fees awarded in the Final Judgment entered in the case on July 7, 2004. In that Final Judgment the Court found that Defendant, UNUM LIFE INSURANCE COMPANY OF AMERICA (“Unum”), had improperly denied benefits under a disability income plan provided to Plaintiff, NANCY BARNES HOLT (“Holt”), by Holt’s employer. Specifically, the Court reversed Unum’s decision to deny benefits to Holt as of May 1, 1995 and ordered Unum to pay full disability benefits to Holt under the policy from that date through September 26, 1995. The Court also required Unum to reconsider the denial of Holt’s disability benefits for the period from September 27, 1995 to the present time.
In the Final Judgment, the Court awarded interest to Holt at the legal rate for those disability payments owed between May 11, 1995 and September 26, 1995, with interest being calculated from the date each payment was due until the date of the judgment. The Court also provided that Holt, as prevailing party in the litigation, was entitled to an award of attorney’s fees for the services of her attorney throughout the case.
Unum timely filed a Motion for Rehearing seeking relief on several grounds. The Court granted rehearing on the issues of interest and attorney’s fees and denied rehearing as to all other issues. Both parties have had the opportunity to address those issues in extensive oral arguments and in well-written briefs in which both issues were addressed.
This case was originally brought by Holt to have this Court review the denial of insurance benefits by Unum in accordance with the Employee Retirement Income Security Act of 1974 as amended, 29 U.S.C. §1001, et seq. (ERISA). The first question in analyzing whether interest and attorney’s fees are awardable in this case is whether the provisions of ERISA preempt state law in making those determinations.
This is particularly important because Holt relies on the general rule of state law discussed in Schideler v. Connecticut General Life Ins. Co., 563 So.2d 1082 (5th DCA 1990) and Ray v. Traveler’s Ins. Co., 477 So.2d 634 (5th DCA 1985), which establish that, in an action on a contract, the person to whom the debt is owed is also entitled to interest at the legal rate from the date the debt was due even when there is a bonafide dispute as to the obligation to pay. Unum, on the other hand, argues that ERISA preempts the application of state law on the issue of interest and attorney’s fees as a result of the language in 29 U.S.C. §1144(a). That section provides that:
“The provisions of this title. . . shall supersede any and all state laws insofar as they may now or hereafter relate to any employee benefit plan.”
The case law interpreting that preemption provision has focused on the meaning of the words “relate to”. In Shaw v. Delta Airlines, Inc., 463 U.S. 85, 96-97 (1983), the United States Supreme Court stated that the phrase “relate to” must be interpreted:
“under its broad common sense meaning so that state law relates to an employee benefit in the normal sense of the phrase if it has a connection with or reference to such a plan.” Id.
The Court went on to say that:
“Some state actions may affect employee benefit plans in too tenuous, remote or peripheral a manner to warrant a finding that the law “relates” to the plan.” Id.
The Florida Fifth District Court of Appeal has acknowledged that:
“State laws that have only an indirect effect on employee benefit plans might not be superseded.” See Schideler, 563 So.2d at 1083.
As a result of the foregoing, Holt argues under Schideler, that her state law claim for prejudgment interest does not directly relate to benefits that are provided under the ERISA plan and is therefore not preempted. Unum argues to the contrary that the state law which Schideler purports to apply to an ERISA claim is preempted because an award of prejudgment interest on benefits to be paid by the ERISA plan clearly relates to benefits under the plan. Unum further argues that the United States Supreme Court has more recently held in Aetna Health, Inc. v. Davila, 124 S.Ct. 2488, 2491 (2004) that “any state law cause of action that duplicates, supplements or supplants to the ERISA civil enforcement remedy conflicts with the clear congressional intent to make the ERISA remedy exclusive, and is therefore preempted.”
From the foregoing authorities, this Court finds that both the issue of prejudgment interest and the issue of attorney’s fees clearly relate to Unum’s benefit plan at issue, and therefore concludes that the ERISA legislation preempts the application of state law as to both issues. It is therefore incumbent on this court to analyze each of the two issues in the light of the federal ERISA legislation and cases decided with respect to that legislation.
A. AWARD OF INTEREST UNDER ERISA
As both parties acknowledged at the trial of this case, Section 1132(a)(1)(B) of ERISA authorizes a person to bring a civil action “to recover benefits due him under the terms of the his plan, to enforce this rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan.” The United States Third Circuit Court of Appeals has recently held that a plaintiff’s request for interest on an award of ERISA benefits is no more than an ordinary request for prejudgment interest on a judgment that would be obtained pursuant to a federal statute. See, Skretvedt v. E.I. Dupont De Nemours, 372 F. 3rd 193, 205 (3rd Cir. 2004). Moreover, earlier decisions have provided that the award of prejudgment interest to a prevailing plaintiff in ERISA cases is a matter committed to the sound discretion of the trial court. See, Florence Nightingale Nursing Service, Inc. v. Blue Cross/Blue Shield of Alabama, 41 F.3rd 1476, 1484 (11th Cir. 1995); Moon v. American Home Assurance Co., 888 F. 2d 86, 89-90 (11th Cir. 1989). At least one federal court has also acknowledged that prejudgment interest should be awarded when the relief granted would otherwise fall short of making the claimant whole as a result of denial of the use of the funds for a period of time. That holding is found in Anthuis v. Colt Industries Operating Corp., 971 F. 2d 999, 1010 (3d Cir. 1992), citing Stroh Container Co. v. Delphi Indus., Inc., 783 F. 2d 743, 753 (8th Cir. 1986), an opinion which states:
“As a general rule, prejudgment interest is to be awarded when the amount of the underlying liability is reasonably capable of ascertainment and the relief granted would otherwise fall short of making the claimant whole because he or she has been denied the use of the money which was legally due.”
Awarding prejudgment interest is intended to serve at least two purposes:
To compensate prevailing parties for the true costs of money damages incurred, and,
Where liability and the amount of damages are fairly certain, to promote settlement and deter attempts to benefit from the inherent delays of litigation.
Thus, prejudgment interest should ordinarily be granted unless exceptional or unusual circumstances exist to make the award of interest inequitable.” Id. at 1010.
In arguing that recovery of prejudgment interest is not available under ERISA, Unum cites Flint v. ABB, Inc., 337 F.3rd 1376 (11th Cir. 2003). In that case, an employee plan participant sued the plan administrator to recover interest on a payment for retroactive benefits. As in the case at bar, the administrator had determined that Flint was no longer totally disabled within the meaning of the plan had notified him that the benefits would be terminated. The plaintiff appealed the termination, and the plan ultimately reinstated his benefits and paid an amount which made the benefits retroactive to the date of termination. The plaintiff then sued under ERISA asserting a claim only for the interest on the retroactive payments he had already received. The Eleventh Circuit then held that the interest was not recoverable. The Flint case is distinguishable on its facts because the plaintiff was seeking only interest on a payment which he had already received, and was not as here, seeking both the disputed benefits and prejudgment interest on such benefits.
This Court finds that the rationale set forth in Anthuis is persuasive because Unum in this case has withheld benefits from Holt for almost ten years. Failure to award Holt prejudgment interest on the sums due would clearly fall short of making her whole because she has been denied the use of the funds in question for an extended period. Since an award of such prejudgment interest is discretionary under Skretvedt and Moon, this Court will exercise that discretion by awarding the interest sought.
B. AWARD OF ATTORNEY’S FEES UNDER ERISA
ERISA expressly authorizes state and federal courts, in their discretion, to award reasonable attorney’s fees and costs to either party in actions brought under ERISA. See, 29 U.S.C. §1132 (g). The United States Fifth Circuit Court of Appeals established a test involving five factors which is to be applied to the decision to award attorney’s fees. See, Ironworker’s Local #272 v. Bowen, 624 F.2d 1255, 1266 (5th Cir. 1980). The five factors announced by the Court are as follows:
(1) The degree of the opposing party’s culpability or bad faith;
(2) The ability of the opposing party to satisfy an award of fees;
(3) Whether an award of fees against the opposing party would deter others from acting under similar circumstances;
(4) Whether the party requesting fees sought to benefit all participants and beneficiaries of an ERISA plan or to resolve a significant legal question regarding ERISA; and
(5) The relative merits of the parties’ positions.
According to other cases, these five factors “should guide but should not control” the trial court’s decision. See, Nachwalter v. Christie, 805 F.2d 956, 961-962 (11th Cir. 1986). The Eleventh Circuit has also observed that “no one of these factors is necessarily decisive, and some may not be apropos in a given case, but together they are the nuclei of concerns that a court should address. In particular types of cases or in any individual case, however, other considerations may be relevant as well.” See, Plumbers and Steamfitters Local #150 Pension Fund v. Vertex Constr. Co., Inc., 932 F.2d 1443, 1452 (11th Cir. 1991) (quoting Ironworkers, 624 F.2d at 1266).
In this case, the Court has determined in its Final Judgment that a vocational review made by Unum of Holt’s capabilities following the termination of her benefits was fatally flawed by a mischaracterization of Holt’s job position. The evidence shows that if Unum had carefully read the materials provided to it and had properly investigated the tasks which Holt was required to perform in order to meet the requirements of her position, her benefits would likely have not been terminated. While such a failure on the part of Unum does not necessarily rise to level of bad faith, there is no question that Unum has some culpability in this case as a result of failing to perform a proper analysis of Holt’s capabilities. Therefore, the Court finds in favor of Holt as to the first factor of the attorney’s fee test. With respect to the second factor, it is clear that Unum has the ability to satisfy an award of fees in this case. With respect to the third factor, this Court finds that an award of fees against Unum in this case will deter Unum and others from acting arbitrarily in the characterization of a claimant’s job. With respect to the fourth factor, it is clear that Holt is seeking to benefit only herself and not all participants of the plan and that there are no strikingly significant legal questions regarding ERISA present in this case.
With respect to the fifth factor, it is clear that Unum’s position in this case is without merit primarily because Unum failed to properly characterize Holt’s job position for purposes of vocational review. When disability benefits are at issue, that characterization is crucial to the claimant, and is evident that the mischaracterization may have cost Holt up to ten years of disability benefits.
Since at least three, and perhaps four, of the five factors set forth in Ironworker’s support an award of attorney’s fees to Holt in this case, this Court will exercise its discretion with respect to those fees by making such an award.
In making this award, the Court notes that the Final Judgment awarded attorney’s fees to Holt on the basis that she was the prevailing party. Although that rationale for an award may not have been proper under ERISA, the foregoing analysis shows that the original result of an awarding attorney’s fees is supported by the evidence and the law.
Accordingly, it is ORDERED AND ADJUDGED:
1. Unum’s Motion for Rehearing is hereby denied in its entirety.
2. The Court ratifies and reaffirms its Final Judgment entered in this case on July 7, 2004 except as to the reason for the award of attorney’s fees. The award of such fees is ratified and reaffirmed for the reasons set forth in this order.
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