Micha v. Group Disability Benefits Plan for Gynecologic Oncology Associates Partners, LLC ( 2015 )

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS FILED
FOR THE NINTH CIRCUIT
JAN 15 2015
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
JOHN PAUL MICHA, M.D., an No. 12-55816
individual,
D.C. No. 3:09-cv-02753-JM-BGS
Plaintiff,
MEMORANDUM *
and
SUN LIFE ASSURANCE COMPANY OF
CANADA, a Delaware corporation,
Defendant-Cross-Defendant
- Appellant,
v.
GROUP DISABILITY BENEFITS PLAN
FOR GYNECOLOGIC ONCOLOGY
ASSOCIATES PARTNERS, LLC, a
California limited liability company,
Defendant-Cross-Claimant
- Appellee.
Appeal from the United States District Court
for the Southern District of California
Jeffrey T. Miller, Senior District Judge, Presiding
Argued February 6, 2014 Submitted January 15, 2015
Pasadena, California
*
This disposition is not appropriate for publication and may not be cited to
or by the courts of this circuit except as may be provided by Ninth Circuit Rule
36-3.
Before: WARDLAW, MURPHY, ** and BERZON, Circuit Judges.
The district court ordered Sun Life Assurance Company of Canada (“Sun
Life”) to pay Group Disability Benefits Plan for Gynecologic Oncology
Associates Partners, LLC (“Group Disability”) $38,216.75 in attorney’s fees.
29 U.S.C. § 1132(g)(1). Sun Life appeals. Exercising jurisdiction pursuant to
28 U.S.C. § 1291, this court affirms.
Group Disability is an employee welfare plan established and maintained to
provide disability benefits to employees of Gynecologic Oncology Associates
Partners, LLC (“GOA”). Group Disability purchased a disability policy from Sun
Life covering GOA’s employees, including Dr. John Micha. Micha sought
disability benefits from Sun Life. When Sun Life denied the claim, Micha
brought suit against Sun Life and Group Disability. 1 See 29 U.S.C.
§ 1132(a)(1)(B). In response to Micha’s suit, Group Disability filed an answer in
**
The Honorable Michael R. Murphy, Senior Circuit Judge for the U.S.
Court of Appeals, Tenth Circuit, sitting by designation.
1
This appeal, which arises under the Employee Retirement Income Security
Act of 1974 (“ERISA”), is a remnant of discarded precedent. In Everhart v.
Allmerica Financial Life Insurance Co., 275 F.3d 751, 756 (9th Cir. 2001), this
court held that 29 U.S.C. § 1132(a)(1)(B) “does not permit suits against a third-
party insurer to recover benefits when the insurer is not functioning as the plan
administrator.” Instead, under Everhart, the ERISA plan was the proper
defendant in a suit for benefits. Id. After the filing of the complaint giving rise
to this appeal, this court overruled Everhart. Cyr v. Reliance Standard Life Ins.
Co., 642 F.3d 1202, 1207 (9th Cir. 2011) (en banc). Because of this change, the
resolution of this case is likely of no practical significance to anyone other than
the parties on appeal.
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which it conceded each and every meaningful allegation in the complaint and
asserted Micha was entitled to disability benefits under the terms of the disability
policy issued to it by Sun Life. Group Disability also filed a cross-claim against
Sun Life; the cross-claim was labeled as a state-law-based request for declaratory
relief. Group Disability asserted Sun Life’s wrongful denial of Micha’s claim led
to the suit against it and, thus, any costs it was forced to expend to participate in
the lawsuit should be reimbursed by Sun Life.
When Sun Life settled with Micha, Group Disability sought its legal fees
from Sun Life. See 29 U.S.C. § 1132(g)(1). Sun Life resisted the fee request,
arguing as follows: (1) because Group Disability did not bring an ERISA-based
cause of action against it, Group Disability was not entitled to attorney’s fees
pursuant to § 1132(g)(1); (2) Group Disability did not achieve any success on the
merits; and (3) under the multi-factor test set out in Hummell v. S.E. Rykoff & Co,
634 F.2d 446, 453 (9th Cir. 1980), Group Disability was not entitled to a fee
award. The district court rejected each of these three contentions and awarded
fees to Group Disability.
1. Sun Life asserts Group Disability does not qualify for an award of
attorney’s fees under § 1132(g)(1) because it did not bring a separate ERISA-
based cross-claim against Sun Life. Sun Life focuses on the following
highlighted clauses of the statute: “In any action under this subchapter . . . by a
participant, beneficiary, or fiduciary, the court in its discretion may allow a
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reasonable attorney’s fee and costs of action to either party.” 29 U.S.C. §
1132(g)(1) (emphasis added).
Sun Life’s arguments ignore the fact it and Group Disability were both
parties to Micha’s underlying ERISA-based suit for benefits. 29 U.S.C.
§ 1132(a)(1)(B). Although Group Disability was denominated as Sun Life’s co-
defendant in that suit, it was co-defendant in name only. Group Disability was a
mere nominal defendant, named for the sole purpose of rendering Micha’s
complaint consistent with the now-overruled Everhart decision. 2 Thus, Micha’s
case involved two parties, both technically labeled defendants, that assumed fully
adverse litigation positions.
This court has made clear an award of attorney’s fees under § 1132(g)(1)
may be granted to more than one plaintiff. See, e.g., Nelson v. EG & G Energy
Measurements Grp., Inc., 37 F.3d 1384, 1392 (9th Cir. 1994). Such an award is
also proper under the unique facts of this case, i.e., when a district court is faced
with a party assuming the same position as the plaintiff, but that party is
nominally labeled a defendant solely for the purpose of procedural regularity. Cf.
Dolch v. United Cal. Bank, 702 F.2d 178, 181 (9th Cir. 1983) (holding, in context
of determining existence of diversity jurisdiction, courts are entitled to align the
parties according to their interest in the litigation and without regard to labels
2
The record in this case makes clear that Sun Life retained the sole power
to award or deny Micha’s request for benefits.
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applied to those parties in a complaint). In this unique case, the district court
acted within the bounds of its discretion when it implicitly realigned the parties to
reflect their true interests in this litigation and, then, awarded fees to Group
Disability as a prevailing plaintiff pursuant to § 1132(g)(1). 3
2. To be entitled to an award of attorney’s fees under § 1132(g)(1), Group
Disability must demonstrate “‘some degree of success on the merits’” and
demonstrate the five Hummell factors weigh in its favor. Simonia v. Glendale
Nissan/Infiniti Disability Plan, 608 F.3d 1118, 1121 (9th Cir. 2010). “We review
for an abuse of discretion the district court’s decision on a motion for attorney’s
fees.” Id.
Having concluded Micha’s ERISA suit against defendant Sun Life and
nominal-defendant/plaintiff-in-interest Group Disability is the proper vantage
from which to review the validity of the district court’s fee award, this court
easily rejects Sun Life’s arguments as to success on the merits. Sun Life
contends that in deciding whether an attorney’s fee award was appropriate, the
district court was required to focus on the relief Group Disability obtained on its
3
Arguing for a contrary result, Sun Life relies heavily on Corder v. Howard
Johnson & Co., 53 F.3d 225 (9th Cir. 1994). Corder does not support Sun Life’s
position. Corder does not address whether a nominal defendant like Group
Disability may be awarded fees as a prevailing plaintiff and expressly notes “a
non-enumerated party may be awarded attorney’s fees” under § 1132(g)(1) as
long as the “the party initiating the action was one of the enumerated parties.” Id.
at 229 n.3.
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own behalf. At each and every point necessary, Group Disability supported
Micha’s request for disability benefits as consistent with the insurance contract it
purchased from Sun Life. When, in the course of the underlying litigation, the
district court informed Sun Life it had serious concerns regarding Sun Life’s
handling of Micha’s claim for disability benefits, Sun Life settled the suit. When
it did so, Sun Life fully vindicated Group Disability’s interests in the lawsuit.
Nor did the district court abuse its discretion in determining Group
Disability’s actions in the suit were at least more than minimally responsible for
the success of the suit. Although Group Disability did not submit voluminous
filings, the district court is in the best position to evaluate how Group Disability
contributed to a resolution in Dr. Micha’s favor. This case settled after the
district court noted serious concerns about the way Sun Life undertook to resolve
Dr. Micha’s claim for benefits. The court’s comments came at the conclusion of
a hearing to resolve the scope of the district court’s standard of review, an issue
briefed by Group Disability. Thus, Group Disability participated in the key
aspects of the case that led to a settlement in Dr. Micha’s favor. 4
4
The bulk of Sun Life’s arguments as to this issue are more appropriately
addressed to the reasonableness of Group Disability’s fee request. Sun Life did
not, however, appeal the reasonableness of the fee award the district court granted
to Group Disability. Instead, it pointedly limited its appeal to the propriety of
any award in the first instance. Thus, any challenge to the reasonableness of the
amount of the fee award is waived.
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3. Finally, Sun Life asserts the district court erred in applying the Hummell
factors to Micha’s suit, rather than to Group Disability’s state-based claim against
Sun Life. This issue is logically indistinct from Sun Life’s assertion it was
improper for the district court to base a fee award to Group Disability on Micha’s
original suit against Sun Life and Group Disability. That is, having determined
the district court was correct to base a fee award to Group Disability on Micha’s
underlying ERISA suit, rather than Group Disability’s state-law cross-claim, it
was likewise correct when it applied the Hummell factors to the suit upon which
the fee award was based.
The district court’s award of attorney’s fees to Group Disability is hereby
affirmed.
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