Norma Martin, Brian Martin v. Arkansas Blue Cross and Blue Shield, a Mutual Insurance Company , 270 F.3d 673 ( 2001 )

PER CURIAM.

Norma and Brian Martin appeal the district court’s denial of attorney’s fees following their successful suit to certify benefits for Norma’s lung transplant operation under a plan governed by the Employee Retirement Income Security Act (ERISA). The Martins also appeal the district court’s determination that ERISA fee awards cannot be calculated on a contingency basis. We affirm in part, reverse in part, and remand.

When Norma Martin lost a lung because of bronchoalveolar cell carcinoma, her treating physicians recommended that she have her remaining lung transplanted with a healthy one. Martin asked Arkansas Blue Cross & Blue Shield (the Plan) to certify benefits for the transplant pursuant to an ERISA employee welfare benefit plan in which she participated. After the Plan denied benefits, Martin and her husband sued, alleging that benefits had been wrongfully denied.

The district court held that a procedural irregularity rendered the Plan’s denial unreasonable, ordered the Plan to certify coverage for the lung transplant, and invited the Martins to file a petition for attorney’s fees. The Martins’ petition asked for a contingent fee based on the cost of the lung transplant surgery (1/3 of $125,000, or $41,666.67). The Plan resisted the petition, but without presenting any evidence of special circumstances that would render the award unjust. See Landro v. Glendenning Motorways, Inc., 625 F.2d 1344, 1356 (8th Cir.1980) (holding that a prevailing plan participant “should ordinarily recover an attorney’s fee unless special circumstances would render such an award unjust.”).

The district court denied the petition for fees. The district court applied the five-factor test for awarding ERISA fees set forth in Lawrence v. Westerhaus, 749 F.2d 494, 495-96 (8th Cir.1984), and determined that the factors weighed in favor of the Plan. The district court acknowledged the Landro presumption in favor of awarding fees absent special circumstances, but did not find any special circumstances. Instead, the district court merely concluded that “on balance, however, consideration of the Lawrence factors leads the Court to believe that plaintiffs are not entitled to shift their attorneys’ fee onto the shoulders of the defendant in this matter.”

The district court also denied the fee petition on the alternative ground that the Martins had not offered any information concerning the number of hours reasonably spent on the litigation, or the reasonable hourly rate for such services. The district court held that a contingent fee award was inappropriate in an ERISA case. The Martins immediately filed a motion for reconsideration, setting forth an hourly fee request in the amount of $11,091. The Martins brought this appeal after the district court denied their motion for reconsideration.

'We review a district court’s determination regarding an ERISA fee award for abuse of discretion. Stanton v. Larry Fowler Trucking, Inc., 52 F.3d 723, 729 (8th Cir.1995). A district court abuses its discretion when it improperly evaluates the considerations relevant to an award of fees. Welsh v. Burlington Northern, Inc., Employee Benefits Plan, 54 F.3d 1331, 1342, 1343 (8th Cir.1995).

This appeal raises the question whether a district court abuses its discretion when it denies an ERISA fee award by applying the Lawrence factors, without considering the Landro presumption. We conclude that the district court improperly evaluated the fee petition when it failed to apply the presumption in favor of awarding fees absent special circumstances, and therefore abused its discretion. See McConnell v. MEBA Med. & Benefits Plan, 778 F.2d 521, 525 (9th Cir.1985) (holding that a district court abused its discretion in denying fees where there were no special circumstances present that would make an award unjust); cf. Walke v. Group Long Term Disability Ins., 256 F.3d 835, 842 (8th Cir.2001) (affirming an award of fees where an ERISA plan faded to cite any special circumstances that would make an award unjust). A proper consideration of the five factors will usually lead to the conclusion that a prevailing plan participant or beneficiary should recover attorneys’ fees. In those circumstances where it does not, merely finding that the five factors favor the Plan does not amount to special circumstances that would make an award unjust.

The Martins argue that the district court should have awarded a contingent fee award based on % the value of Norma’s lung transplant operation. We disagree. The Supreme Court has “generally turned away from the contingent-fee model” in fee shifting cases. City of Burlington v. Dague, 505 U.S. 557, 566-67, 112 S.Ct. 2638, 120 L.Ed.2d 449 (1992). We follow the lead of other circuits that have concluded, in light of Burlington, that contingent fee awards are inappropriate in ERISA cases. Elmore v. Cone Mills Corp., 23 F.3d 855, 863 (4th Cir.1994); Cann v. Carpenters’ Pension Trust Fund for N. Cal., 989 F.2d 313, 318 (9th Cir.1993).

Finally, the Martins contend that the district court abused its discretion when it denied their motion for reconsideration, in which they supplied the court with an hourly fee request. The district court denied the original request for fees, as well as the motion for reconsideration, primarily because it had already determined that the Lawrence five-factor test weighed in the Plan’s favor. Having reversed on that issue, we must decide whether the district court acted within its discretion in denying the fee request solely on the basis that the Martins initially failed to request fees on an hourly basis.

We conclude that the district court should consider the request for hourly fees on remand. See Johnston v. Comerica Mortg. Corp., 83 F.3d 241, 246-47 (8th Cir.1996) (reversing a denial of a motion for reconsideration where counsel in a class action immediately moved for leave to submit time records after the district court announced that it would only consider an award on an hourly basis); cf. In re Stauffer Seeds, Inc., 817 F.2d 47, 50 (8th Cir.1987) (addressing a request for fees under Fed.R.Civ.P. 37, and holding that, unless initial fee request is “manifestly inadequate,” district court should request additional information or hold a hearing before denying fees in toto).

We affirm the district court’s denial of the request for contingent fees, but reverse and remand for consideration of the Martins’ request for hourly fees.