O'Bryhim v. Reliance Standard ( 1999 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
RAY A. O'BRYHIM,
Plaintiff-Appellee,
v.
No. 98-1472
RELIANCE STANDARD LIFE INSURANCE
COMPANY,
Defendant-Appellant.
Appeal from the United States District Court
for the Eastern District of Virginia, at Alexandria.
James C. Cacheris, Senior District Judge.
(CA-95-335-A)
Argued: March 3, 1999
Decided: August 16, 1999
Before WIDENER, NIEMEYER, and KING, Circuit Judges.
_________________________________________________________________
Affirmed by unpublished per curiam opinion.
_________________________________________________________________
COUNSEL
ARGUED: James Adams Young, CHRISTIE, PABARUE, MOR-
TENSEN & YOUNG, P.C., Philadelphia, Pennsylvania, for Appel-
lant. William Parry Dale, MCCHESNEY & DALE, P.C., Bowie,
Maryland, for Appellee. ON BRIEF: Diana L. Moro, CHRISTIE,
PABARUE, MORTENSEN & YOUNG, P.C., Philadelphia, Pennsyl-
vania, for Appellant. Charles F. Fuller, MCCHESNEY & DALE,
P.C., Bowie, Maryland, for Appellee.
_________________________________________________________________
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
_________________________________________________________________
OPINION
PER CURIAM:
Reliance Standard Life Insurance Company, an ERISA plan
administrator, appeals the district court's rulings awarding appellee
Ray O'Bryhim (1) additional benefits and interest in excess of
$29,000 following a remand to Reliance, and (2) approximately
$114,000 in attorneys' fees and costs.1 We possess jurisdiction of this
appeal pursuant to the provisions of 28 U.S.C. § 1291. Finding no
reversible error, we affirm.
I.
This action arises under the Employee Retirement Income Security
Act of 1974 (ERISA), 29 U.S.C. § 1001 et seq. On October 1, 1989,
appellant Reliance Standard Life Insurance Company (Reliance)
issued a long-term group disability insurance policy (Policy) covering
eligible employees of the Pohanka Automotive Group (Pohanka). On
July 11, 1993, Mr. O'Bryhim, an employee of Pohanka, sought long-
term disability benefits from Reliance, based on his claim that he was
disabled by Chronic Fatigue Syndrome (CFS). Reliance denied his
claim, which Mr. O'Bryhim then appealed through the administrative
process authorized by the Policy. Reliance denied Mr. O'Bryhim's
appeal, and also denied two subsequent appeals made by Mr.
O'Bryhim. After exhausting his administrative remedies, Mr.
O'Bryhim filed a complaint against Reliance on March 17, 1995, in
_________________________________________________________________
1 Reliance raised other grounds for appeal in its brief. However, at oral
argument, Reliance's counsel confined the appeal to the 1998 award of
additional benefits and attorneys' fees to Mr. O'Bryhim. We will do like-
wise, because we agree that the only issues of substance are the two iden-
tified by counsel -- the 1998 award of additional benefits and attorneys'
fees. Indeed, we have considered the unargued issues and conclude that
they are without merit.
2
the district court for the Eastern District of Virginia, claiming that
Reliance had wrongfully denied his claim for long-term disability
benefits. See 28 U.S.C. § 1132(a)(1)(B), (a)(3).
After denying the parties' cross-motions for summary judgment,
Judge Cacheris conducted a non-jury trial in December 1995. On Feb-
ruary 29, 1996, the district court entered a Memorandum Opinion and
Order remanding the case to Reliance. Thereafter, on April 9, 1996,
Reliance moved the court for reconsideration, or alternatively, for a
new trial. On May 10, 1996, after considering briefs and hearing argu-
ment, the court issued an Amended Memorandum Opinion and Order.
The Amended Memorandum Opinion corrected one factual error in
the February 29, 1996 Opinion, but in all other respects, Reliance's
post-trial motion was denied.2 By order of May 21, 1996, the district
court specifically retained jurisdiction over the matter.
On November 20, 1996, Reliance issued its decision on remand
awarding Mr. O'Bryhim limited long-term disability benefits. Mr.
O'Bryhim then moved the district court for additional benefits and
attorneys' fees. After briefing and oral argument, the district court
granted Mr. O'Bryhim's motion in part, by its published opinion
dated February 23, 1998.3 See O'Bryhim v. Reliance Standard Life
Ins. Co., 997 F. Supp. 728 (E.D. Va. 1998). Reliance now appeals.
II.
Mr. O'Bryhim began working for Pohanka in approximately 1983,
and in 1992 was promoted to the position of General Manager of the
Pohanka dealership in Fredericksburg, Virginia. As General Manager,
Mr. O'Bryhim was responsible for all aspects of the dealership opera-
tion, including sales and fixed operations, such as the repair and body
shops.
_________________________________________________________________
2 The modification in the May 10, 1996 Amended Memorandum Opin-
ion is not relevant to this appeal. For ease of reference, we will designate
the opinion issued after trial as "the May 1996 Opinion." See O'Bryhim
v. Reliance Standard Life Ins. Co., No. Civ. A. 95-335-A (E.D. Va. May
10, 1996) (amended memorandum opinion).
3 For ease of reference, we will designate the district court's published
opinion after remand as "the February 1998 Opinion."
3
During his employment with Pohanka, Mr. O'Bryhim began to
experience numerous physical symptoms and ailments, including
severe fatigue, disorientation, lack of energy, lack of concentration,
short-term memory loss, inability to sleep, and cognitive difficulties.
He was treated by a number of different doctors for his symptoms.
On September 1, 1992, Mr. O'Bryhim was transferred from the
Fredericksburg dealership to the Pohanka dealership in Chantilly, Vir-
ginia, where he became the General Sales Manager. At the Chantilly
dealership, Mr. O'Bryhim worked fewer hours as a General Sales
Manager than he had as General Manager at the Fredericksburg
dealership; he also had reduced supervisory responsibilities in his new
position. At the Chantilly dealership, he was responsible only for the
operation of the automobile sales department, which was staffed by
five or six salespeople. As General Manager at the Fredericksburg
dealership, however, Mr. O'Bryhim had been responsible not only for
a sales department of fifteen to eighteen salespeople, but also for the
management of fixed operations. Throughout 1992, Mr. O'Bryhim
earned a guaranteed monthly salary of $8,300, translating into an
annual salary of over $90,000. After working at the Chantilly dealer-
ship for four months, Mr. O'Bryhim resigned from his employment
with Pohanka on December 31, 1992. From January 1993 until July
1994, Mr. O'Bryhim was unemployed and unable to work in any
capacity.
From 1990 and continuing through 1994, Mr. O'Bryhim sought
treatment for his various symptoms with a number of physicians,
including Michelle Romano, M.D., Robert Johnson, M.D., Paul
Levine, M.D., and Alan Pocinki, M.D. In December 1990, Dr.
Romano prescribed medications for Mr. O'Bryhim to treat his fatigue
and anxiety attacks. Dr. Romano referred Mr. O'Bryhim to Dr. John-
son in August 1992. Mr. O'Bryhim consulted Dr. Johnson in person
or by phone from October 1992 through August 1993. Dr. Johnson
prescribed Prozac and other medications to Mr. O'Bryhim throughout
this period. Mr. O'Bryhim saw Dr. Pocinki on June 3, 1993, who
diagnosed him with Chronic Fatigue Syndrome (CFS), noting that the
symptoms of CFS had been present since 1989, but had worsened at
the beginning of 1993.
On June 11, 1993, Mr. O'Bryhim filed his claim for long-term dis-
ability benefits with Reliance, pursuant to the Policy. In support of his
4
claim, Mr. O'Bryhim submitted the medical records of Drs. Romano,
Johnson, Levine, and Pocinki. Reliance denied Mr. O'Bryhim's claim
on October 28, 1993, on the ground that his medical information did
not indicate that he was "unable to perform the material duties of [his]
occupation as of January 1, 1993," when he resigned from his
employment with Pohanka. The denial letter also suggested that his
claim was rejected for another reason: that he was not under the "reg-
ular care" of a physician as required by the Policy.
As pointed out above, Mr. O'Bryhim filed three administrative
appeals of this denial of benefits with Reliance--on December 16,
1993; April 8, 1994; and June 22, 1994. Each of his appeals was
denied. On March 17, 1995, Mr. O'Bryhim filed his complaint against
Reliance in the district court for the Eastern District of Virginia.
III.
In its May 1996 Opinion remanding the case to the Plan Adminis-
trator, the district court made several findings of fact that are pertinent
to this appeal. These findings of fact included the following: (1) the
condition Mr. O'Bryhim developed during his employment with
Pohanka was Chronic Fatigue Syndrome; (2) his disability began on
September 1, 1992, the date Mr. O'Bryhim was transferred to the
dealership in Chantilly, Virginia, as General Sales Manager;
(3) Reliance had conducted videotaped surveillance of Mr.
O'Bryhim, which did not reveal any evidence adverse to Mr.
O'Bryhim's claim; (4) Reliance's Director of Technical Services for
Disability, Joseph Randza, testified that it "was not normal to have
surveillance done in CFS cases"; and (5) on September 20, 1993,
prior to the initial decision denying benefits, a claims adjuster for
Reliance recommended approval of Mr. O'Bryhim's claim.
The court remanded the case to the Plan Administrator so that it
could "fully hear the evidence presented in Court to arrive at a deci-
sion on whether or not to award O'Bryhim benefits." (J.A. 60). The
court specifically directed the Plan Administrator to consider addi-
tional telephone calls made by Mr. O'Bryhim to Reliance regarding
his condition that had not been fully recorded by Reliance's claims
examiners, and also to consider certain other testimony.4 The Remand
_________________________________________________________________
4 Crediting Mr. O'Bryhim's trial testimony, the district court found that
Mr. O'Bryhim had made approximately 25 phone calls to Reliance
5
Order stated in pertinent part: "It is ordered . . . that the Plan Adminis-
trator take evidence on the nature of plaintiff Ray O'Bryhim's disabil-
ity and determine the benefits which may be due him as a result."
(J.A. 31).
On November 20, 1996, Reliance issued its decision on remand.
By this decision, Reliance altered its position on Mr. O'Bryhim's
claim, which it had previously denied on four separate occasions, and
instead awarded him limited benefits. Reliance awarded Mr.
O'Bryhim approximately $45,000 in long-term disability benefits, but
its findings diverged from those made by the district court in the May
1996 Opinion in two important respects. First, Reliance determined
in its review that Mr. O'Bryhim was not disabled until January 1,
1993 -- four months later than the date the district court found dis-
ability onset to have occurred. Second, Reliance determined that Mr.
O'Bryhim was not suffering from CFS, but rather from a mental or
emotional disorder, which, under the Plan, entitled O'Bryhim to no
more than two years of disability benefits.
Approximately a year after Reliance's decision on remand, Mr.
O'Bryhim returned to the district court seeking additional relief,
including enforcement of the district court's prior findings that Mr.
O'Bryhim suffered from CFS and was disabled on September 1,
1992, as well as an award of his attorneys' fees. After a hearing on
the matter, the district court ruled partially in Mr. O'Bryhim's favor.
It concluded that Reliance had acted arbitrarily and capriciously in its
November 20, 1996 award, by substituting its findings for those made
by the court in the court's May 1996 Opinion. O'Bryhim, 997 F.
Supp. at 732. Accordingly, the court ordered Reliance to pay Mr.
O'Bryhim the sum of $17,975 for four months of additional long-term
benefits (to cover the period between the onset of the disability on
September 1, 1992 and January 1, 1993), plus $11,225 in pre-
judgment interest, for a total of $29,200. Id._________________________________________________________________
regarding his condition that were not fully recorded by the claims exam-
iners. Furthermore, the district court found that information Dr. Levine
had provided to a claims examiner, Mr. Lorenzo, had likewise not been
adequately recorded. (J.A. 59-60).
6
Mr. O'Bryhim was also awarded attorneys' fees and costs in the
post-remand proceeding. In applying the five-factor test governing the
award of attorneys' fees set forth in Quesinberry v. Life Ins. Co. of
N. Am., 987 F.2d 1017, 1030 (4th Cir. 1993) (en banc), the district
court found that Reliance had acted in bad faith, emphasizing that
Reliance had ignored the district court's pre-remand findings of fact
regarding the date of disability onset and the type of disability that
afflicted Mr. O'Bryhim. O'Bryhim, 997 F. Supp. at 733. After review-
ing the remaining Quesinberry factors and assessing the reasonable-
ness of the fees, the court concluded that Mr. O'Bryhim was entitled
to attorneys' fees in the sum of $112,229.25, with costs of $1,934.60,
for a total of $114,163.85. Id. at 738.
In his request for additional relief, Mr. O'Bryhim also sought con-
sequential damages sustained as a result of his disability. He claimed
that it became necessary for him to sell his family's home because he
could no longer pay the mortgage, and that he was also forced to
withdraw funds from his 401(k) retirement plan, for which he suf-
fered a tax penalty. The district court denied Mr. O'Bryhim claim for
the sales commissions incurred on the sale of his house and the tax
penalty for early withdrawal from his 401(k) plan, concluding that
Reliance's denial of this requested relief was not arbitrary and capri-
cious. Id. at 732.
IV.
A.
It is well settled that the decision by an ERISA plan administrator
to deny benefits is reviewed de novo; however, if the plan confers dis-
cretion on the administrator to determine eligibility or to interpret the
terms of the plan, the denial decision is reviewed by the court for
abuse of discretion. See Firestone Tire and Rubber Co. v. Bruch, 489
U.S. 101, 111, 115 (1989); Ellis v. Metropolitan Life Ins. Co., 126
F.3d 228, 232-33 (4th Cir. 1997). A reviewing court determines de
novo whether the ERISA plan confers discretionary authority on the
administrator, and if so, whether the administrator abused that discre-
tion. Ellis, 126 F.3d at 233 (citation omitted). In this proceeding, the
district court held, and the parties do not dispute, that the Policy con-
7
fers discretion on the administrator. The parties point to the language
in the "Insuring Clause," which states:
INSURING CLAUSE: We will pay a Monthly Benefit if
an Insured:
(1) is Totally Disabled5 as the result of a Sickness6 or Injury
covered by this Policy;
(2) is under the regular care of a Physician;
(3) has completed the Elimination Period; and
(4) submits satisfactory proof of Total Disability to us.
(J.A. 350) (emphasis added).
In construing "satisfactory proof" language that was either identical
or similar to the language contained in the Policy here, other courts
have also concluded that such language confers discretion to deter-
mine eligibility for benefits.7See, e.g., Yeager v. Reliance Standard
_________________________________________________________________
5 The Policy states that
"Totally Disabled" and "Total Disability" mean, with respect to
[Mr. O'Bryhim's class], that as a result of an Injury or Sickness:
(1) during the Elimination Period and for the first 60 months
for which a Monthly Benefit is payable, an Insured cannot
perform the material duties of his/her regular occupation. We
consider the Insured "Totally Disabled" if due to an Injury
or Sickness he or she is capable of only performing the mate-
rial duties on a part-time basis or part of the material duties
on a Full-time basis.
(J.A. 346).
6 Sickness is defined in the Policy as an "illness or disease causing
Total Disability which begins while insurance coverage is in effect for
the Insured." (J.A. 346).
7 Although we have not yet definitively interpreted whether "satisfac-
tory proof" language grants discretion to the plan administrator, we have
previously indicated, in an unpublished opinion, that identical language
in another policy issued by Reliance does confer discretion. See Wilcox
v. Reliance Standard Life Ins. Co., 1999 WL 170411, at **2 (4th Cir.
March 23, 1999) (unpublished).
8
Life Ins. Co., 88 F.3d 376 (6th Cir. 1996); Donato v. Metropolitan
Life Ins. Co., 19 F.3d 375 (7th Cir. 1994); Ceasar v. Hartford Life &
Accident Ins. Co., 947 F. Supp. 204, 206 (D.S.C. 1996); but see
Kearney v. Standard Ins. Co., 175 F.3d 1084 (9th Cir. 1999) (en
banc). We are convinced by the reasoning in the majority of these
cases that the "satisfactory proof" language of the Policy confers dis-
cretion on the Plan Administrator, and thus an abuse of discretion
standard for judicial review is appropriate. This discretionary standard
is circumscribed in this instance, however, by the Plan Administra-
tor's conflict of interest.
Where, as here, the insurer wears two hats, and acts as both the
fiduciary of the Plan's beneficiaries and as the Plan's insurer, the
reviewing court must carefully consider this conflict of interest in its
review. Ellis, 126 F.3d at 233. We have previously explained the
nature of the conflict: "For a fixed premium from the employer, [the
insurance company] both funds and administers the plan, so it bears
the financial consequences -- and reaps the financial rewards -- of
its own coverage decisions." Bedrick v. Travelers Ins. Co., 93 F.3d
149, 151 (4th Cir. 1996).
The Supreme Court observed in Firestone Tire and Rubber Co. v.
Bruch, 489 U.S. 101, 115 (1989), that where the plan administrator
is "operating under a conflict of interest, that conflict must be
weighed as a ``facto[r] in determining whether there is an abuse of dis-
cretion.'" We have stated that "[i]nasmuch as the law is highly sus-
pect of ``fiduciaries' having a personal interest in the subject of their
trust, the ``abuse of discretion' standard is not applied in as deferential
a manner to such plans." Bedrick, 93 F.3d at 152 (citing Bruch, 489
U.S. at 115). We have further explained that
the fiduciary['s] decision will be entitled to some deference,
but this deference will be lessened to the degree necessary
to neutralize any untoward influence resulting from the con-
flict.
Doe v. Group Hospitalization & Med. Servs, 3 F.3d 80, 87 (4th Cir.
1993). We have referred to this less deferential standard as the "modi-
fied abuse of discretion standard." See Ellis , 126 F.3d at 233. We
9
have also noted that where the insurer processes and pays claims, and
acts as plan administrator,
[e]ven the most careful and sensitive fiduciary in those cir-
cumstances may unconsciously favor its profit interest over
the interests of the plan, leaving beneficiaries less protected
than when the trustee acts without self-interest and solely
for the benefit of the plan.
Bedrick, 93 F.3d at 154 (quoting Doe, 3 F.3d at 86-87).8
On the one hand, Reliance, acting as Plan Administrator, was in a
fiduciary relationship with the Plan beneficiaries (including Mr.
O'Bryhim), and was obligated to function accordingly in its decision-
making process. See 29 U.S.C. § 1104(a)(1)(A) (ERISA requires a
fiduciary to "discharge his duties with respect to a plan solely in the
interest of the participants and beneficiaries and for the exclusive pur-
pose of providing benefits . . . and defraying reasonable expenses").
On the other hand, Reliance, as the insurer, reaps the financial
rewards of its claims decisions, and, as a subsidiary of a publicly held
and traded corporation, has a conflicting fiduciary obligation to maxi-
mize profits for the benefit of shareholders.9 The existence of these
conflicting fiduciary duties does not mean that Reliance's decisions
as Plan Administrator are necessarily tainted, but this conflict does
circumscribe its exercise of discretion and compels that judicial
review of Reliance's decisions as Plan Administrator take full account
of its conflict of interest.
B.
_________________________________________________________________
8 Despite what appears to have been some confusion in the district
court regarding the appropriate standard to apply-- "arbitrary and capri-
cious" or "abuse of discretion" -- we believe that the result would have
been the same under either standard. See Sheppard & Enoch Pratt Hosp.,
Inc. v. Travelers Ins. Co., 32 F.3d 120, 125 n.4 (4th Cir. 1994). More-
over, the district court clearly weighed Reliance's conflict of interest in
its review. (J.A. 53).
9 Reliance is owned by Delphi Financial Group, a publicly traded insur-
ance holding company, which is listed on the New York Stock Exchange
(symbol: DFG).
10
As discussed above, the district court made two significant factual
findings in its May 1996 Opinion that provided the basis for its ruling
in February 1998 granting Mr. O'Bryhim additional benefits and
attorneys' fees. First, after reviewing the evidence in the claims file,
the district court found that Mr. O'Bryhim's disability, for the pur-
poses of eligibility for long-term disability benefits, began on Septem-
ber 1, 1992. Second, the court found that Mr. O'Bryhim's condition
was, in fact, CFS. In its November 1996 decision awarding benefits
to Mr. O'Bryhim, Reliance failed to adhere to these findings.
Reliance argues here that the district court abused its discretion by
making these factual findings, when its May 1996 remand to Reliance
encompassed the taking of additional evidence regarding the nature
of Mr. O'Bryhim's disability and the determination of whether bene-
fits were owed him. Reliance further contends that even if the district
court had authority to make factual findings, they were nonetheless
clearly erroneous. The record does not indicate why the district court
proceeded as it did -- instead of, for example, remanding for a new
benefits determination, or simply reversing and granting benefits.
However, it certainly did not abuse its discretion when it remanded
Mr. O'Bryhim's case in May 1996 to Reliance, as the Plan Adminis-
trator, for further consideration of Mr. O'Bryhim's claim.
As we have pointed out, this claim had been contested actively for
several years through the administrative process, including three
unsuccessful appeals to Reliance by Mr. O'Bryhim. When Mr.
O'Bryhim sought judicial relief after exhausting the administrative
process, the district court justifiably believed that findings by the
court would guide and enhance Reliance's timely determination of
benefits on remand. The court's findings in its May 1996 Opinion --
that Mr. O'Bryhim's disability was CFS and that it began on Septem-
ber 1, 1992 -- served, in essence, to forecast to Reliance that it would
be an abuse of Reliance's discretion for it to determine otherwise on
remand.
Most significantly, the district court's findings of fact were not
clearly erroneous. First, there is ample evidence that Mr. O'Bryhim
could not "perform the material duties of [his] regular occupation,"
i.e., General Manager, as of September 1, 1992. Under the Policy, an
individual may be totally disabled if, inter alia, he is only capable of
11
performing part of the duties of his employment on a full-time basis.10
As General Manager of the Fredericksburg dealership, Mr. O'Bryhim
often worked sixty to sixty-five hours per week and was responsible
not only for sales, but also for all fixed operations as well, such as
auto service and repair. Because of Mr. O'Bryhim's ongoing symp-
toms of severe fatigue, lack of concentration, poor memory, head-
aches, and the like, he was unable to perform the full duties of his
occupation. On September 1, 1992, Mr. O'Bryhim was transferred to
a smaller dealership in Chantilly where he was given the less taxing
position of General Sales Manager.
As General Sales Manager at the Chantilly dealership, Mr.
O'Bryhim had a staff of six, as opposed to a staff of fifteen to eigh-
teen at the Fredericksburg dealership, and his duties were limited only
to sales; unlike his previous position, he had no responsibility for any
other aspects of the dealership. He also worked only forty hours a
week in his new position.
The medical evidence confirms that Mr. O'Bryhim was totally dis-
abled under the terms of the Policy prior to his resignation from
Pohanka. For example, and of significance, Dr. Pocinki stated in a
report to Reliance that he believed that Mr. O'Bryhim "was totally
disabled for quite sometime before January 1, 1993." (J.A. 678). Dr.
Pocinki also observed that it was common for doctors who were unfa-
miliar with CFS to misdiagnose it as depression or another emotional
disorder, as was the case with Mr. O'Bryhim. Dr. Pocinki further
explained that
Mr. O'Bryhim's symptoms and the course of his illness
have in fact been so characteristic of the Chronic Fatigue
Syndrome that there is no doubt in my mind that, had he
only seen a physician with some knowledge of this illness,
the proper diagnosis could have been made more than a year
ago, and perhaps as early as 1990. (J.A. 678).
Accordingly, the district court did not clearly err in finding that Mr.
O'Bryhim was demoted because of his disability to a lesser position
_________________________________________________________________
10 See supra note 5.
12
at the Chantilly dealership, and that "he was unable to perform the
materialities of his regular occupation . . . at Pohanka beginning Sep-
tember 1, 1992, and that he was unable to perform any occupation
from January 1, 1993, to July 25, 1994."
Second, the district court did not clearly err in finding that Mr.
O'Bryhim suffered from CFS. The medical evidence submitted by
Mr. O'Bryhim in support of his claim for benefits shows that he dis-
played a number of symptoms, beginning at least in 1990, that were
indicative of CFS. Drs. Levine and Pocinki both diagnosed CFS. Dr.
Levine explained that there was no diagnostic test for CFS, but that
there are "certain abnormalities often seen in patients with this ill-
ness." Dr. Levine also found that Mr. O'Bryhim met the strict case
definition of CFS published in the Annals of Internal Medicine. (J.A.
664). Dr. Pocinki explained that O'Bryhim had many"classic" symp-
toms of CFS and that his condition "unquestionably" satisfied the
Center for Disease Control's diagnostic criteria for CFS.
Reliance ignored these findings, and made its own contrary deter-
minations in its consideration of Mr. O'Bryhim's claim on remand in
November 1996. Applying the modified abuse of discretion standard
to the Reliance decision, it was an abuse of discretion for Reliance to
reject the district court's findings, and instead substitute its own find-
ings.
Although Reliance also argues that it was not bound by the district
court's findings because the remand order did not expressly direct
Reliance to adopt the court's findings of fact, this assertion must fail.
In its April 1996 motion for reconsideration or, alternatively, a new
trial, Reliance sought to overturn certain of the district court's find-
ings of fact -- including the determination that Mr. O'Bryhim's dis-
ability was CFS and that disability onset was September 1, 1992.11 In
seeking such relief, Reliance clearly evidenced its understanding that
these findings were binding, and sought to have them altered. When
Reliance lost its motion for reconsideration, it chose, at its peril, not
to adhere to the district court's decision, but simply to ignore it. This
_________________________________________________________________
11 In its motion for reconsideration or a new trial, Reliance argued that
the findings "should be disregarded or reversed by the Court and a modi-
fied order should be entered." (J.A. 851).
13
it could not do. See Mefford v. Gardner, 383 F.2d 748, 758 (6th Cir.
1967) ("[T]he general rule [is] that, on the remand of a case after
appeal, it is the duty of the lower court, or the agency from which
appeal is taken, to comply with the mandate of the court and to obey
the directions therein without variation.").
After considering Mr. O'Bryhim's motion for additional relief fol-
lowing remand, the district court granted supplemental benefits to Mr.
O'Bryhim for the period between September 1, 1992, and January 1,
1993. Furthermore, Reliance's substitution of its own findings of fact
for the district court's findings in the May 1996 Opinion served as the
primary basis for the court's finding that Reliance had acted in bad
faith.
V.
The district court awarded attorneys' fees and costs in the sum of
$114,163 to Mr. O'Bryhim. This award was based primarily on the
court's finding that Reliance had engaged in bad faith conduct from
the time Reliance first evaluated Mr. O'Bryhim's claim in the sum-
mer of 1993 through the remand decision in November 1996, when
it ignored the district court's findings of fact. Reliance argues that the
district court abused its discretion in awarding O'Bryhim attorneys'
fees. Reliance claims that the district court's finding of bad faith,
which provided the basis for the award of attorneys' fees, was clearly
erroneous.
Under ERISA, the court may, in its discretion, allow a reasonable
attorneys' fee and costs. See 29 U.S.C.§ 1132(g)(1). In this case, the
district court properly applied the five-factor test, to guide the exer-
cise of its discretion, as articulated by this court in Quesinberry v. Life
Ins. Co. of N. Am., 987 F.2d 1017, 1030 (4th Cir. 1993) (en banc).
The five factors are:
(1) degree of opposing parties' culpability or bad faith;
(2) ability of opposing parties to satisfy an award of attor-
neys' fees;
14
(3) whether an award of attorneys' fees against the opposing
parties would deter other persons acting under similar cir-
cumstances;
(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.
Id. at 1029 (citation omitted).
The district court concluded that all of the factors, except for the
fourth, justified awarding attorneys' fees to Mr. O'Bryhim. O'Bryhim,
997 F. Supp. at 733. In its ruling, the court focused on the first factor,
the "bad faith factor," specifically finding that "Reliance acted in bad
faith throughout the consideration of O'Bryhim's claim and on
remand." Id.In support, the district court catalogued a number of examples of
bad faith on the part of Reliance,12 including the following:
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12 The district court's opinion specifically stated as follows:
Examples of Reliance's "bad faith" in processing O'Bryhim's
claim began as soon as O'Bryhim filed his claim. At trial, this
Court found that Reliance wrote to O'Bryhim's treating physi-
cian requesting medical records, and, prior to receiving any
records, requested a video-tape surveillance of O'Bryhim. The
surveillance did not reveal anything negative to O'Bryhim's
claim. As Joseph A. Randza, Reliance's Director of Technical
Services for Disability, testified, it was not normal to have sur-
veillance done in CFS cases. After trial, this Court issued a
Memorandum Opinion and Order, remanding O'Bryhim's case
to the Plan Administrator, and directing the administrator to take
into account the facts discovered at trial. The Court directed the
Plan Administrator also to obtain a job description for O'Bryhim
and to obtain records of certain phone calls. On remand, Reli-
ance overturned this Court's findings of fact, specifically finding
that O'Bryhim was not suffering from CFS (but was instead suf-
15
(1) Reliance had conducted a videotape surveillance of Mr.
O'Bryhim before receiving any medical records it had requested from
his treating physician; (2) the videotape surveillance, which was not
normally done in CFS cases, revealed nothing adverse to Mr.
O'Bryhim's claim; (3) Reliance ignored the court's finding of fact
that Mr. O'Bryhim suffered from CFS, but instead found on remand
that his disability was a mental disorder (which limited Reliance's lia-
bility); and (4) Reliance ignored the court's finding that Mr.
O'Bryhim was disabled on September 1, 1992, and instead found that
disability onset did not occur until January 1, 1993. Id.Although an award of attorneys' fees is reviewed for abuse of dis-
cretion, the determination of bad faith supporting an attorneys' fees
award is a finding of fact that we review for clear error. See Hyatt v.
Shalala, 6 F.3d 250, 255 (4th Cir. 1993). Under the clear-error stan-
dard, we must affirm the district court's finding of bad faith unless,
after reviewing the record, we are "left with the definite and firm con-
viction that a mistake has been committed." Mallory v. Booth Refrig-
eration Supply Co., 882 F.2d 908, 909 (4th Cir. 1989) (quoting United
States v. United States Gypsum Co., 333 U.S. 364, 395 (1948)).
Having carefully reviewed the record, we are unable to say that we
are definitely and firmly convinced that a mistake has been made. We
are thus unable to disturb the district court's finding of bad faith, and,
consequently, uphold the award of attorneys' fees to Mr. O'Bryhim.
VI.
For the foregoing reasons, we affirm the judgment of the district
court.
AFFIRMED
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fering from a mental disorder, which limited Reliance's liabil-
ity), and also that O'Bryhim was not disabled until a date four
months after the date which this Court had set.
O'Bryhim, 997 F. Supp. at 733.
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