ERISA And Attorney Fees

Here is an ERISA case from the Southern District, Galveston Division.  The case is styled, Unum Life Insurance Company of America v. Sandra Mohedano, et al.

Before the Court is Plaintiff’s Motion for Attorneys’ Fees and Brief in Support.  The Court had earlier granted Unum’s cross-motion for summary judgment while denying Defendants, cross motion in an ERISA action.  A Final Judgment followed, terminating the case.  Unum now seeks to recoup attorneys’ fees expended while litigating the following: (1) the interpleader of Life Benefits ($10,492.50); and (2) the appeal of its denial of Accidental Death and Dismemberment Benefits ($76,683.50).  It is undisputed that Unum is the successful party in this litigation.  Nevertheless, based on the applicable law, the motion for attorneys’ fees is Denied.  The reasons are as follows.

Under ERISA, 29 U.S.C. Section 1132(g)(1), a court in its discretion may allow a reasonable attorney’s fee and cost of action to either party.  This fee-shifting provision is a statutory exception to the “American Rule,” wherein the prevailing litigant is ordinarily not entitled to collect a reasonable attorneys’ fee from the loser.  The text of the statute confers broad discretion upon district courts as it provides no factors relevant to the decision.  The only prerequisite is that the party to which the fees and costs are allowed achieved some degree of success on the merits.  The Fifth Circuit has provided guidelines to assist district courts in exercising their discretion.  These factors include:

(1)  the degree of the opposing parties’ culpability or bad faith;

(2)  the ability of the opposing parties to satisfy an award of attorneys’ fees;

(3)  whether an award of attorneys’ fees against the opposing parties would deter other persons acting under similar circumstances;

(4)  whether the parties requesting attorneys’ fees sought to benefit all participants and beneficiaries of an ERISA plan or to resolve a significant legal question regarding ERISA itself; and

(5)  the relative merits of the parties’ positions.

According to the the Fifth Circuit, the consideration of these factors is discretionary.

Finding the factors useful, the Court considers each of them in turn and finds that Unum is not entitled to recover attorneys’ fees.  First, there is no evidence that Defendants’ appeal of Unum’s denial of benefits was done in bad faith.  The Mohedanos put forth a colorful argument that Unum could have granted the AD&D benefits.  It is of no moment that the Court ultimately found that Unum did not abuse its discretion in determining otherwise.  Second, payment of attorneys’ fees would likely prove to be an onerous burden upon Ms. Mohedano given the net benefits received.  Third, the Court does not find that a reprieve from paying attorneys’ fees would deter future beneficiaries from appealing the denial of benefits.  Fourth, Unum’s claim sought to benefit all beneficiaries in only the most generalized terms.  Nor did the cross-motions for summary judgment require the Court to resolve any legal question regarding ERISA.  Instead, they required the Court to apply established law to a unique set of facts.  Finally, and related to the first factor, both parties presented cogent arguments in support of their claims.

For the foregoing reasons, Unum’s Motion for Attorneys’ Fees is Denied.