The Transitional v. Metropolitan Life ( 1996 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_______________
No. 96-40154
Summary Calendar
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THE TRANSITIONAL LEARNING CENTER AT GALVESTON,
Plaintiff-Appellee,
VERSUS
METROPOLITAN LIFE INSURANCE COMPANY,
Defendant-Appellant.
_________________________
Appeal from the United States District Court
for the Southern District of Texas
(G-95-17)
_________________________
October 19, 1996
Before SMITH, DUHÉ, and BARKSDALE, Circuit Judges.
JERRY E. SMITH, Circuit Judge:*
Metropolitan Life Insurance Company (“MetLife”) appeals the
award of attorneys’ fees and prejudgment interest to the Transi-
tional Learning Community at Galveston (“TLC”) under the Employee
Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C.
§§ 1001-1461 (West 1985 & Supp. 1995). We affirm in part and
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion
should not be published and is not precedent except under the limited circumstances
set forth in 5TH CIR. R. 47.5.4.
vacate and remand in part.
I.
TLC sued MetLife in state court in November 1994, alleging
that MetLife had failed to reimburse TLC for various medical
expenses incurred in connection with its treatment of Angela
Sibley, a dependent of an insured under a MetLife medical insurance
policy. MetLife removed this action to federal court on the same
day that the state court, after MetLife had failed to appear,
entered a default judgment on TLC’s claims. The district court
later reformed the state court judgment to reflect the parties’
subsequent agreement to the proper amount of monies owed. Upon
motion, the court awarded TLC attorneys’ fees and pre- and post-
judgment interest on the amount of the reformed judgment.
We address first MetLife’s argument that this case should be
dismissed because TLC failed to exhaust its administrative remedies
under the ERISA-regulated plan prior to filing the instant action.
According to MetLife, the disposition of the instant claim had been
held up for over two years because TLC failed to provide a
completed Statement of Continued Disability from the plan adminis-
trator. Once TLC forwarded the completed statement to MetLife, the
claim was settled promptly.
Although we agree with MetLife that TLC may have failed to
exhaust its administrative remedies, we refuse to dismiss the
instant action, as MetLife did not raise this objection timely.
2
When TLC filed its original action, MetLife had ample opportunity
to raise its exhaustion defense, and we will not reward it for
failing even to appear in that action. That MetLife chose not to
answer TLC’s complaint in state court, but rather compelled the
state court to enter a default judgment against it, constituted
waiver of its right to assert an exhaustion defense. The district
court found, properly, that MetLife did not proffer any reasonable
justification for its failure to appear in the state court action,
and thus we do not believe that it is prejudiced unduly by its
failure to assert its defenses timely.
MetLife correctly asserts that we have applied the exhaustion
doctrine in suits arising under ERISA, see Medina v. Anthem Life
Ins. Co., 983 F.2d 29, 33 (5th Cir.), cert. denied, 510 U.S. 816
(1993), but we have never construed the doctrine strictly as a
jurisdictional bar, see id. (noting that plaintiff did not exhaust
her remedies because she had never filed a claim for the disputed
sum); Simmons v. Willcox, 911 F.2d 1077, 1081 (5th Cir. 1990)
(noting that plaintiff did not exhaust her remedies because she had
failed to file any claim for benefits with the insurer); Meza v.
General Battery Corp., 908 F.2d 1262, 1279 (5th Cir. 1990)(noting
that the plaintiff did not exhaust her remedies because she never
requested plan information or applied for benefits prior to filing
suit). Rather, we have held that sound public policy underlies the
application of the doctrine to ERISA, see id. at 1279, and the same
3
applies in the instant case: MetLife could have facilitated the
prompt and efficient disposition of an ERISA claim by appearing in
state court and raising its exhaustion defense in that forum.
II.
MetLife next challenges the award of attorneys’ fees. We
review this for abuse of discretion. See Ramsey v. Colonial Life
Ins. Co. of Am., 12 F.3d 472, 480 (5th Cir. 1994).
After reviewing the five factors1 used in this circuit, the
district court concluded that
[t]he record fails to show that any of the first four
factors listed in Bowen weigh significantly in favor of
either granting or denying attorneys’ fees. Nonetheless,
consideration of the final factor, viewed in light of
Defendant’s initial refusal to pay Plaintiff the owing
funds and subsequent failure to contest liability in a
proper or reasonable manner, persuades this Court to
award Plaintiff the requested attorneys’ fees.
913 F. Supp. 504, 506-07 (S.D. Tex. 1996) (emphasis added).
MetLife interprets these sentences “clearly [to] state[]” that the
court reached its decision “solely on the basis of the relative
1
The five factors are:
(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 would deter
other persons from 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.
Iron Workers Local No. 272 v. Bowen, 624 F.2d 1255, 1266 (5th Cir. 1980).
4
merits of the parties’ positions.” MetLife next protests that,
because the court failed to assess the merits properly, the award
should be reversed.
We disagree. As a preliminary matter, the district court did
not state expressly that the first four factors were inapposite to
the decision, but rather that none on its own significantly cut in
favor of an award.
“[I]n light of Defendant’s initial refusal to pay Plaintiff
the owing funds and subsequent failure to contest liability in a
proper or reasonable manner,” 913 F. Supp. at 506-07, the court
made plain that MetLife’s culpability or bad faith (the first Bowen
factor) became significant when considered along with the merits.
That the court could have been more lucid in its explication of the
Bowen factors is not reversible error as long as such factors guide
the decision-making process. See Harms v. Cavenham Forest Indus.,
984 F.2d 686, 694 (5th Cir.)(“No one of these factors is necessar-
ily 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 applying section 502(g).”)(citation omitted), cert.
denied, 510 U.S. 944 (1993).
After reviewing the record with proper deference to the
district court’s findings, as required under our limited standard
of review, we disagree with MetLife that the court abused its
5
discretion in awarding fees.2 The district court properly could
have found that MetLife’s refusal to reimburse TLC for its expenses
more than two years after it incurred such expenses (settlement of
which expenses was made promptly after TLC’s filing of the instant
action), coupled with its failure to appear in state court, and its
continued contest of jurisdiction based on an exhaustion defense
that could have been raised properly in the state court proceeding,
supported an award of fees based upon Bowen factors (1) and (5).3
III.
Finally, MetLife challenges the award and amount of prejudg-
ment interest. We review for abuse of discretion. See In re Tex.
Gen. Petroleum Corp., 52 F.3d 1330, 1339 (5th Cir. 1995).
MetLife’s first argumentSSthat the district court erred in
granting any prejudgment interestSSis without merit. We have
recognized previously that ERISA does not preclude the district
court from awarding attorneys’ fees and that an award of prejudg-
2
We decline TLC’s invitation to award attorneys’ fees for its work
incurred as part of this appeal. Although we do not believe the district court
abused its discretion in so awarding fees, we do not, on independent review of
the recordSSi.e., where we are not bound by the deferential standard of review
on appealSSfind that the Bowen factors counsel in favor of such an award.
3
MetLife’s citations to Ramsey, Harms, and Hogan v. Kraft Foods, 969 F.2d
142, 146 (5th Cir. 1992), are inapposite. In each of these cases, we noted that
where there is a complete lack of any bad faith or culpability on the part of the
defendant, the deterrent purpose that the third Bowen factor purports to serve
is inapplicable. Ramsey, 12 F.3d at 480; Harms, 984 F.2d at 694 n.12; Hogan,
969 F.2d at 146. As our discussion above notes, however, the record in the
instant case reflects such evidence of bad faith or culpability.
6
ment interest under ERISA furthers the congressional purposes of
the statute. See Hansen v. Continental Ins. Co., 940 F.2d 971, 984
(5th Cir. 1991). Hence, the decision that fees were appropriate in
the instant case is not an abuse of discretion.4
MetLife argues correctly, however, that under Texas law, which
we consult for guidance in assessing prejudgment interest in ERISA
claims, see Hansen, 940 F.2d at 984, prejudgment interest accrues
only from the thirtieth day following the date upon which sums
outstanding become “due and payable.” See TEX. REV. CIV. STAT. ANN.
art. 5069-1.03 (Vernon 1987). The district court failed to make a
finding of the due and payable date for the outstanding charges,
and we are unable to discern such from the record. Thus, although
we affirm the award of prejudgment interest, we vacate the judgment
and remand for a determination of when MetLife’s obligation to pay
TLC for the outstanding claims became due and payable.
AFFIRMED in part, VACATED and REMANDED in part.
4
MetLife misreads Dependahl v. Falstaff Brewing Corp., 653 F.2d 1208, 1219
(8th Cir.), cert. denied, 454 U.S. 968 (1981), to disallow attorneys’ fees where
the defendant has not had use of the money during the course of the proceedings.
Dependahl does not so require defendant’s use of the money, but rather notes that
such a factor counsels in favor of a court’s award of “appropriate equitable
relief” under ERISA. Id.
7