Moon v. UNUM Provident Corp ( 2006 )

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 06a0453n.06
Filed: June 29, 2006
No. 05-1974
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
DIANE M. MOON, )
)
Plaintiff-Appellant, )
) ON APPEAL FROM THE
v. ) UNITED STATES DISTRICT
) COURT FOR THE WESTERN
UNUM PROVIDENT CORP., ) DISTRICT OF MICHIGAN
)
Defendant-Appellee. )
)
BEFORE: KEITH and COLE, Circuit Judges; MILLS, District Judge.*
PER CURIAM. Plaintiff-Appellant Diane M. Moon (“Moon” or “Plaintiff”) appeals the
district court’s order denying her application for attorney’s fees and costs. For the reasons set forth
below, we REVERSE the judgment of the district court and REMAND with instructions to enter
an order awarding Moon attorney’s fees and costs.
I.BACKGROUND
A. Factual and Procedural Background
The instant appeal arises out of a prior Employee Retirement Income Security Act
(“ERISA”), 29 U.S.C. § 1001 et seq., action for long-term disability (“LTD”) benefits between
Moon and Defendant-Appellee Unum Provident Corporation (“UNUM” or “Defendant”). This
*
The Honorable Richard Mills, United States District Judge for the Central District of
Illinois, sitting by designation.
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Court resolved the underlying litigation in Moon’s favor. See Moon v. Unum Provident Corp., 405
F.3d 373 (6th Cir. 2005) (“Moon I”).
In Moon I, Moon appealed the district court’s denial of her motion for judgment on the
administrative record and the district court’s judgment finding that UNUM’s final decision to
terminate her LTD benefits was not arbitrary and capricious. A majority panel of this Court
disagreed, reversed the district court’s decision, and remanded the case for entry of judgment in
favor of Moon. The majority concluded that UNUM’s final decision upholding the termination of
Moon’s LTD benefits was arbitrary and capricious. The dissent in the case concluded, on narrow
grounds, that, under the highly deferential arbitrary and capricious standard, the district court did
not err in upholding the denial of benefits. The dissent did note, however, that “[w]ere we to view
the matter under a de novo standard, I might very well decide otherwise.” Id. at 382.
On April 21, 2005, subsequent to her successful appeal to this Court, Moon petitioned this
Court to grant an order directing the district court to conduct an evidentiary hearing to award her
attorney’s fees pursuant to 29 U.S.C. § 1132(g)(1) of ERISA. This Court declined to grant Moon’s
requested relief and instead decided, “[t]he better course is to leave the question of attorney fees to
the district court in the first instance . . . [w]e therefore instruct the district court to determine
whether an award of attorney fees is appropriate in this case.” (J.A. at 57) (6th Cir. Order remanding
the case to the district court to decide the issue of attorney’s fees in the first instance). Thereafter,
the case was remanded to the district court to decide whether to grant Moon’s request for attorney’s
fees. After submission of the briefs, but without a hearing on the issue, the district court denied
Moon’s motion for attorney’s fees. See Moon v. Unum Provident Corp., 408 F. Supp. 2d 463 (W.D.
Mich. 2005) (“Moon II”). The district court reached its conclusion after analyzing the five factors
articulated in Sec’y of Dep’t of Labor v. King, 775 F.2d 666, 669 (6th Cir. 1985) (per curiam),
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commonly called the “King factors.” See Moon II, 408 F. Supp. 2d at 465.
On July 20, 2005, Moon timely filed the instant appeal seeking review of the district court’s
denial of her request for attorney’s fees.1
II. ANALYSIS
A. STANDARD OF REVIEW
We review a district court’s denial of a request for attorney fees to a prevailing claimant
under ERISA for an abuse of discretion. See Ford v. Uniroyal Pension Plan, 154 F.3d 613, 620 (6th
Cir. 1998). “An abuse of discretion occurs when the district court relies on clearly erroneous
findings of fact, . . . improperly applies the law, . . . or . . . employs an erroneous legal standard.”
Barner v. Pilkington North America, Inc., 399 F.3d 745, 748 (6th Cir. 2005) (internal quotation
marks and citation omitted). This Circuit “has defined an abuse of discretion as a definite and firm
conviction that the trial court committed a clear error of judgment.” Eagles, Ltd. v. American Eagle
Found., 356 F.3d 724, 726 (6th Cir. 2004) (quoting Arban v. West Publ’g Corp., 345 F.3d 390, 404
(6th Cir. 2003)) (internal quotation marks omitted); see also Anderson v. Procter & Gamble Co.,
220 F.3d 449, 452 (6th Cir. 2000) (“This court reviews for abuse of discretion the district court’s
denial of the plaintiff’s request for attorneys’ fees pursuant to 29 U.S.C. § 1132(g)(1)”).
B. DISCUSSION
In an action by a plan participant, the district court, in its discretion, “may allow a reasonable
attorney’s fee and costs of action to either party.” 29 U.S.C. § 1132(g)(1). The Sixth Circuit utilizes
the following five-factor King test to assess whether a district court properly exercised its discretion
in awarding fees: (1) the degree of the opposing party’s culpability or bad faith; (2) the opposing
party’s ability to satisfy an award of attorney’s fees; (3) the deterrent effect of an award on other
1
This Court has appellate jurisdiction over appeals from final judgments of the district
court under 28 U.S.C. § 1291.
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persons under similar circumstances; (4) whether the party requesting fees sought to confer a
common benefit on all participants and beneficiaries of an ERISA plan or resolve significant legal
questions regarding ERISA; and (5) the relative merits of the parties’ positions.2 See First Trust
Corp. v. Bryant, 410 F.3d 842, 851 (6th Cir. 2005). No single factor is determinative, and thus, the
district court must consider each factor before exercising its discretion. See Schwartz v. Gregori,
160 F.3d 1116, 1119 (6th Cir. 1998).
These factors are not statutory and typically not dispositive. See First Trust, 410 F.3d at 851.
Rather, they are considerations representing a flexible approach. Id. In this case, however, the
district court relied entirely on this legal framework in reaching its conclusion that Moon was not
entitled to attorney’s fees. Therefore, in reviewing the district court’s decision for an abuse of
discretion, we must review his findings as to each of the five King factors. In King, this Court
adopted the Ninth Circuit standard that, “an abuse of discretion exists only when the court has the
definite and firm conviction that the district court made a clear error of judgment in its conclusion
upon weighing relevant factors.” 775 F.2d at 669; see also Foltice v. Guardsman Products, Inc.,
98 F.3d 933, 939 (6th Cir. 1996). Finally, in our Circuit, there is no presumption that attorney’s fees
will be awarded. See Maurer v. Joy Technologies, Inc., 212 F.3d 907, 919 (6th Cir. 2000) (citation
omitted).
Our review of the five King factors leads us to the conclusion that the district court abused
its discretion in denying Moon’s motion for attorney’s fees.
2
As a preliminary matter, we reject UNUM’s argument that this Court should disregard
Moon’s arguments concerning King factors not raised in her brief to the district court. The
district court analyzed all five King factors in reaching its conclusion that Moon was not entitled
to attorney’s fees. Thus, we appropriately review the lower court’s finding regarding each factor
for an abuse of discretion.
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1. Degree of Opposing Party’s Culpability or Bad Faith
In Moon II, the district court held that UNUM had not engaged in bad faith or culpable
conduct and that UNUM did not possess an ill motive. See 408 F. Supp. 2d at 465-66. We disagree.
In a separate case, a panel of this Court stated,
[a]n arbitrary and capricious denial of benefits does not necessarily indicate
culpability or bad faith. However, in this case, [Defendant] ignored overwhelming
evidence of [Plaintiff’s] disability, and, instead denied her claim based on a theory
that lacked legitimate foundation. [Defendant] then sought to defend this theory with
reference to isolated snippets from the record.
Heffernan v. Unum Life Ins. Co. of America, No. 02-3412, 101 Fed. Appx. 99, *109 (6th Cir. June
11, 2004) (unpublished opinion).
In the instant case, the prior panel in Moon I concluded that UNUM’s decision to repeatedly
deny Moon’s claims for disability benefits was arbitrary and capricious because they did not provide
a reasoned explanation that supported their outcome. See Moon I, 405 F.3d at 381-82. For example,
it is undisputed in the record that the physician on whose opinion UNUM wholly relied never
examined Moon, “[the physician] arrived at his opinion not upon examination of Moon, but rather
upon what our discussion here shows was a selective review of administrative record.” Id. at 381.
See also Spangler v. Lockheed Martin Energy Sys., Inc., 313 F.3d 356, 359-62 (6th Cir. 2002)
(observing that a selective review of the administrative record is inappropriate). In addition, the
physician, upon whom the plan administrator relied, was also an employee of UNUM; this Court
took issue with this fact, stating, “when a plan administrator’s explanation [as to why they
terminated a person’s benefits] is based on the work of a doctor in its employ, we must view the
explanation with some skepticism.” Id. at 381-82 (citing Univ. Hosp. of Cleveland v. Emerson Elec.
Co., 202 F.3d 839, 846 (6th Cir. 2000) (holding that a plan administrator’s conflict of interest is a
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factor to consider when reviewing for whether the administrator’s decision was arbitrary or
capricious)).
Applying these facts to the question of whether the district court erred when it determined
UNUM did not engage in culpable conduct, the answer is clear: UNUM engaged in culpable conduct
and this factor should be weighed in Moon’s favor and against UNUM. Not only did UNUM deny
Moon’s claims based solely on the opinion of a physician in its employ, but they also repeatedly
denied her claims even though this physician ignored substantial evidence in the administrative
record indicating she was disabled and the physician never examined Moon. Therefore, we must
reject the district court’s conclusion that “Defendant pursued their position in good faith and did not
engage in any misconduct during the investigation or proceedings before this Court or on appeal.”
Moon II, 408 F. Supp. 2d at 465. Without question, UNUM’s wholesale adoption of the opinion of
an interested physician, who based his findings on selective information in the administrative record
and did not examine Moon, is misconduct that supports our decision to weigh this factor against
UNUM. See Spangler, 313 F.3d at 362 (“we can only conclude that Met Life, as Spangler
contends, ‘cherry-picked’ her file in hopes of obtaining a favorable report from the vocational
consultant as to Spangler’s ability to work.”).
In the alternative, even if we assume arguendo that the district court correctly found that
UNUM did not engage in culpable conduct, the district court still incorrectly weighed this factor in
UNUM’s favor based upon its own flawed conclusion. Specifically, the district court stated,
“[m]oreover, it is difficult to conclude that Defendant acted in a culpable manner in this close case,
where two of the four judges who reviewed this case concluded that Defendant provided a reasoned
explanation for the denial of benefits that was not arbitrary and capricious.” Moon II, 408
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F. Supp. 2d at 466 (emphasis added). In reaching its “two out of four judges” conclusion, the district
court relied upon its own overturned decision in the underlying action brought by Moon to recover
her LTD benefits and the dissent in Moon I. This reasoning is an abuse of discretion. This was not
a close case. Not only was the underlying judgment in Moon I – which formed the basis for Moon’s
request for attorney’s fees – decided by a majority panel of this Court, but the en banc court also
considered whether to grant rehearing in this published case, and elected not to do so. In addition,
even the dissent in Moon I, upon whom the district court relies, expressed doubt about the propriety
of the district court’s decision, stating, “[w]ere we to view the matter under a de novo standard, I
might very well decide otherwise.” Moon I, 405 F.3d at 382.
It is wholly inappropriate for the district court to rely on its overturned decision to support
the denial of Moon’s petition for attorney’s fees in the instant case. It is an affront to our system of
justice for the district court to heavily and repeatedly rely on its incorrect decision to support its
conclusion that Moon was not entitled to attorney’s fees. The district court’s conclusion was in err.
We find that this factor weighs in Moon’s favor.
2. Opposing Party’s Ability to Satisfy an Award of Attorney’s Fees
The district court stated, “[o]bviously, this factor favors Plaintiff because Defendant, a large
insurance company, is certainly able to satisfy the requested attorney fee amount.” Moon II, 408
F. Supp. 2d at 466. This conclusion is undisputed and the district court did not err in its finding.
Even UNUM acknowledges, in their brief to this Court, that this factor weighs against them, stating
that, “[t]he District Court properly recognized that ‘this factor favors plaintiff because Defendant,
a large insurance company, is certainly able to satisfy the requested attorney’s fees.’” Appellee’s
Br. at 11. Therefore, we weigh this factor in Moon’s favor.
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3. Deterrent Effect of Award on Other Persons Under Similar Circumstances
On this factor, the district court stated, “there is little deterrent effect to be gained because
this case presented a close and unique set of facts. Moreover, this factor is less significant because
Defendant did not act in bad faith.” Moon II, 408 F. Supp. 2d at 466. We disagree. As discussed in
conjunction with the first factor, this was not a close case. A majority panel of this Court decided
that the district court’s prior decision was incorrect and thus that decision cannot be relied upon by
the district court as a basis for denying Moon’s request for attorney’s fees. The district court may
disagree with the fact that its decision was overturned by this Court, but such disagreement would
not justify denying Moon attorney’s fees.
In addition, the facts of this case are not so unique that they fail to serve any deterrence value
to other insurance companies under similar circumstances. The majority’s published decision in
Moon I articulated important principles that all plan administrators should heed. For example,
before terminating a plan participant’s benefits, a plan administrator should ensure that the opinions
upon which they rely to make their decisions to terminate are based on a thorough review of the
administrative record. In addition, under certain circumstances, the opining physician’s opinion
should also be based upon an actual examination of the claimant. Thus, the published decision in
the underlying case should deter other insurance companies from making the same arbitrary
decisions as UNUM in the instant case.
Finally, we also reject the district court’s conclusion that the significance of this factor is
diminished because UNUM did not act in bad faith. As discussed above, UNUM was culpable in
this case. See id. (“deterrent effect . . . is likely to have more significance in a case where the
defendant is highly culpable.”) (citing Foltice, 98 F.3d at 937). Thus, the district court abused its
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discretion in weighing this factor in UNUM’s favor.
4. Conferring a Common Benefit on all ERISA Plan Beneficiaries
The district court concluded that Moon only sought LTD benefits for herself and did not seek
to confer a benefit upon all plan participants. See Moon II, 408 F. Supp. 2d at 466. Moon does not
contest this point in her brief to this Court. Therefore, it is undisputed that Moon did not seek to
confer a common benefit on all plan participants. The district court did not reach the question of
whether Moon sought to resolve significant legal questions concerning ERISA. Although Moon
argues, on appeal, that Moon I resolved significant legal questions regarding ERISA, whether this
is true or not is irrelevant because there is no evidence in the record that Moon instituted this
litigation to resolve any significant legal issues. Therefore, the district court did not err in its
analysis of this factor. We agree with the district court that this factor does not weigh in Moon’s
favor.
5. Relative Merit of the Parties’ Positions
Regarding this factor, the district court concluded,
[a]lthough the Sixth Circuit determined that Defendant’s decision was arbitrary and
capricious, it cannot be said that Defendant’s position was unreasonable or lacking
in merit. Nor can it be said that Plaintiff’s position significantly outweighed that of
Defendant. This was an extremely close case, evidenced by the fact that this Court
initially determined that Defendant’s denial of benefits was not arbitrary and
capricious and that the reversal of this judgment was issued over a dissent by Judge
Siler, who also concluded that Defendant’s decision was not arbitrary and
capricious.
Id. (citation omitted) (emphasis added). Once again, the district court errs in its conclusion that this
is an extremely close case based on its prior overturned decision and the fact that, on appeal, a
Circuit Judge of this Court dissented. A majority panel of this Court overruled the district court’s
initial decision. Thus, the district court cannot continue to rely on that decision to make collateral
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judgments in this case. In Moon I, the first appeal in this case and the basis for the instant litigation,
this Court held that UNUM acted arbitrarily and capriciously in its decision to terminate Moon’s
LTD benefits. In addition, UNUM made this decision in an obviously culpable manner, therefore,
we conclude that the relative merit of Moon’s position in this case is stronger than UNUM’s
position. Therefore, we find that the district court erred in not weighing this factor in Moon’s favor.
III. CONCLUSION
After analyzing the King factors, we find that factors one, two, three, and five favor Plaintiff-
Appellant Moon. Thus, the district court erred when it concluded that “[w]hile Defendant is able
to pay a fee award, the other factors do not ‘weigh heavily’ in Plaintiff’s favor.” Id. (citation
omitted). Our analysis of these factors indicates otherwise, and thus, the district court’s decision
must be reversed. Moreover, the district court’s repeated reliance on its overturned decision to
support most of its conclusions convinces this Court that the district court abused its discretion in
considering Moon’s request for attorney’s fees under the King test. See Maurer, 212 F.3d at 919
(“An abuse of discretion exists only when ‘the court has the firm and definite conviction that the
district court made a clear error of judgment in its conclusion upon weighing relevant factors.’”)
(citing Schwartz, 160 F.3d at 1119).
Therefore, for the foregoing reasons, we REVERSE the judgment of the district court and
REMAND with instructions to enter an order awarding Plaintiff-Appellant Moon attorney’s fees
and costs.
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