Gross v. Sun Life Assurance Co. of Canada

United States Court of Appeals
For the First Circuit
Nos. 16-1958, 16-2002
DIAHANN L. GROSS,
Plaintiff, Appellee/Cross-Appellant,
v.
SUN LIFE ASSURANCE COMPANY OF CANADA,
Defendant, Appellant/Cross-Appellee.
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Rya W. Zobel, U.S. District Judge]
Before
Thompson, Lipez, and Kayatta,
Circuit Judges.
Joshua Bachrach, with whom Wilson, Elser, Moskowitz, Edelman
& Dicker LLP was on brief, for appellant/cross-appellee.
Jonathan M. Feigenbaum, with whom Michael D. Grabhorn, Andrew
M. Grabhorn, and Grabhorn Law Office, PLLC were on brief, for
appellee/cross-appellant.
January 18, 2018
LIPEZ, Circuit Judge. More than four years ago, we
remanded this case with the instruction that appellant Sun Life
Assurance Co. reconsider its rejection of Diahann Gross's claim
for disability benefits based on chronic and severe pain. See
Gross v. Sun Life Assurance Co. of Can. (Gross I), 734 F.3d 1, 4
(1st Cir. 2013). Although we found at that time that Gross's
medical evidence supported a finding of total disability, we
concluded that, "[a]s the record now stands, we are unable to
resolve the debate between the parties on the significance of . . .
surveillance evidence" obtained by Sun Life. Id. at 27. After
additional administrative proceedings, the company again denied
her claim and Gross again challenged the denial in federal court.
On cross-motions for summary judgment, the district court ruled in
Gross's favor, finding that Sun Life should have awarded Gross
benefits because the surveillance record as developed does not
undermine this court's prior assessment of the medical evidence.
In this appellate sequel, Sun Life challenges the
district court's view of the expanded administrative record. It
argues that Gross failed to adduce medical evidence in the renewed
proceedings to offset the contradictory surveillance -- and thus
did not meet her burden to prove that she is totally disabled.
Sun Life also claims the district court abused its discretion in
failing to impose sanctions on one of Gross's attorneys. In a
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cross-appeal, Gross assigns error to the district court's
calculations of prejudgment interest and attorney's fees.
After careful review of the record and the law, we affirm
the district court's rulings on the disability claim and sanctions.
However, we vacate the prejudgment interest award and remand for
consideration of the appropriate rate of interest. We affirm the
district court's attorney's fee calculation in all but two
respects, concluding that two components of the award must be
increased.
I. Background
A. The First Appeal
Until she was placed on disability leave in August 2006,
at age 34, Gross worked as an optician and office manager at
Pinnacle Eye Care LLC in Lexington, Kentucky. In our prior
decision, we described in great detail the facts then in the
administrative record concerning Gross's condition and medical
evaluations. See id. at 17-21. Here, we begin with a summary
description of the original record and briefly review that prior
decision to remand. We then describe the new evidence obtained in
the second round of administrative proceedings. We elaborate below
on both sets of facts where pertinent to our analysis.
1. The Original Medical Evidence
Multiple medical professionals who examined Gross
between 2005 and 2007 reported that she was experiencing a variety
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of debilitating symptoms, including "chronic pain, inability to
sit or stand for extended periods of time, severely diminished
functional capacity in her right arm, and inability to bend, kneel,
or crouch." Gross v. Sun Life Assurance Co. of Can. (Gross Remand
Op.), No. 09-11678-RWZ, slip op. at 2 (D. Mass. June 24, 2016).
Gross's treating physician, Dr. Rita Egan, a rheumatologist,
opined that Gross was incapable of performing even sedentary
activity, and she concluded that Gross suffered from reflex
sympathetic dystrophy ("RSD"), fibromyalgia, widespread pain, and
chronic fatigue. Gross I, 734 F.3d at 17. In two reports completed
in late 2006, Egan noted, with some variation between the
statements, that Gross could not sit in one place for more than an
hour to ninety minutes, drive for more than ninety minutes, use
her right hand, or lift more than ten pounds. Id. at 17 & n.19.1
Other practitioners echoed Egan's diagnoses, noting,
inter alia, abnormalities in the appearance of, and the way Gross
positioned, her right hand. See id. at 18, 21, 22.2 A physical
1More than a year later, in November 2007, Egan submitted a
functional capacity report in support of Gross's appeal of Sun
Life's original denial of benefits setting out greater
restrictions: she could not sit or stand for more than an hour
each day, and she could not push or lift any weight. Gross I, 734
F.3d at 21.
2For example, Dr. Fred Coates reported in March 2007 that
Gross appeared to be in "severe pain while seated" and that her
right arm hung "limply at her side." Gross I, 734 F.3d at 18. He
also described her right hand as "red, slightly swollen, cool to
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therapist who performed a functional capacity evaluation ("FCE")
in early 2007 reported "a number of 'key limitations' in Gross's
physical abilities, including lack of functional use of her right
arm, poor standing balance, inability to perform sustained
overhead activity, need for assistance or a handrail to negotiate
stairs, and inability to crouch, kneel, squat or crawl." Id. at
18-19. The physical therapist, Chris Kaczmarek, suspected that
she suffered from RSD or an equivalent condition known as complex
regional pain syndrome ("CRPS"), or fibromyalgia. Id. at 18. The
FCE concluded that Gross "does not present at a functional level
that could maintain sustained work activity." Id. at 19.
Significantly, Kaczmarek stated that Gross was
cooperative and "willing to work to maximum abilities" when
performing tasks for the FCE. Id. at 23. Additional evidence of
Gross's good-faith in describing her symptoms and limitations came
from her co-workers and employers, who submitted letters
"describing her persistence in continuing to work despite obvious
pain and compromised physical capacity." Id. Her boss observed
that "[s]he wasn't going to give in until she absolutely had to,"
id. at 23 n.29, and Pinnacle's owner, Paul Wedge, stated that "[w]e
stopped her from working when we received her doctor orders that
she was not fit to work," id. at 23 (alteration in original).
the touch and sweating." Id. Gross states in her brief that she
is "right hand dominant."
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The medical evidence, however, did not uniformly support
Gross's disability claim. All of her diagnostic tests were
negative, and several doctors speculated that psychological
factors might be contributing to the severity of her symptoms.
Id. at 24. Despite recommendations from multiple physicians that
she obtain counseling or behavioral treatment, she never did so.
Id. Most puzzling was the evidence resulting from an
investigator's surveillance of Gross on nine days between November
2006 and February 2007. On most of those days, the surveillance
revealed little activity by Gross, including multiple days when
she either did not leave the house or was out briefly in
unremarkable circumstances. Our prior decision highlighted three
exceptions:
[O]n November 9, 2006, shortly after dropping
off a teenager believed to be her stepdaughter
at school, Gross was observed driving for
about an hour and a half to her mother's home,
with a brief stop at a rest area along the
way. Second, during the evening of January
11, 2007, Gross drove a short distance with
her stepdaughter to a Kmart, where she was
observed bending down toward lower-level
shelves, extending her arms above her head to
retrieve items, and kneeling to examine other
items.[3] Third, on February 21, after
receiving a phone call that her mother had
been admitted to the hospital with chest pain,
Gross drove to a gas station, pumped gas using
her right hand, and then drove for two hours
to the hospital, with a brief stop halfway
3Gross disputed that she bent down as described, stating that
she "simply knelt down, with the bulk of her weight balance[d] on
her knee which was braced on the ground."
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through the trip. About two hours later, she
left the hospital and drove home.
Id. at 19.
In support of its original denial of benefits, Sun Life
also had procured opinions from two medical consultants who
conducted paper reviews of Gross's medical records. In the first
records review, Dr. James Sarni noted that "the documentation does
not strongly support a diagnosis of [RSD or CRPS]." Id. at 19
n.24. He suggested an evaluation by a neurologist, which Dr.
Rukmaiah Bhupalam subsequently performed on February 22, 2007, the
day after Gross had made the trip to the hospital. Although
Bhupalam initially concluded that Gross was "totally disabled even
for sedentary work on a part time basis," he changed his assessment
after viewing the surveillance videotapes. Id. at 20. He observed
that "she can function quite well and probably will be able to
return to her previous occupation," although he also noted that "a
re-evaluation might be beneficial." Id.
After Bhupalam's examination, the second non-examining
consultant, Dr. William Hall, reviewed Gross's medical records and
concluded that "the surveillance videos undermined [her]
subjective reports of pain and functional limitations." Id. A
third consultant performed a paper review after Gross appealed the
initial benefits denial. That physician, Dr. Alan Neuren, noted
the inconsistencies between Gross's condition as reported by
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healthcare providers and her appearance under surveillance, and he
stated that "'[t]he only reasonable conclusion' to be drawn 'is
that she has deliberately embellished her symptoms to her providers
for secondary gain.'" Id. at 21.
2. The Remand Rationale and Directive
Given the well documented history of pain and other
symptoms recorded by the medical professionals who examined her,
and the buttressing observations of her co-workers, we had "no
difficulty" concluding that Gross had submitted adequate medical
evidence to prove her entitlement to disability benefits. Id. at
22.4 We pointed out that, even though many of Gross's complaints
were not readily susceptible to objective confirmation, the record
did contain some objective evidence, "as well as the recognition
by Sun Life's own medical consultant, Dr. Hall, that Gross's
'musculoskeletal symptoms, as presented by her, are credible to
treating and consulting physicians.'" Id.
4 We summed up our assessment of the record as follows:
[T]he sustained and progressive nature of
Gross's complaints, their facial credibility
to the medical practitioners who personally
examined her, and the objective symptoms
consistent with RSD -- given the absence of
any method for reaching a conclusive diagnosis
-- support a finding of total disability.
Gross I, 734 F.3d at 24-25.
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We were concerned, however, about the "significant
incompatibilities between Gross's reports and her observed
functional capacity" while under surveillance, particularly during
the three episodes described above. Id. at 26. Yet, even faced
with those contradictions, Dr. Bhupalam had suggested that a re-
evaluation of Gross could be helpful that's-- "an observation we
underst[ood] to suggest that the video surveillance, while
damaging to Gross, did not necessarily undermine her claim." Id.
We also noted that the record did not reveal whether Bhupalam or
Neuren had been told that Gross's two-hour drive to a hospital in
February 2007 was precipitated by news that her mother had suffered
a medical emergency. Id. at 26-27. That seeming omission of
context led us to question "whether Sun Life ha[d] made a bona
fide effort to determine Gross's capabilities." Id. at 27. At
the same time, we noted the absence of a statement from Gross's
own doctor "refuting Sun Life's assertion in its original denial
letter that the surveillance 'show[ed] a capacity for activity
that far exceeds' the limitations she claims." Id. (alteration in
original).5
5 As noted above, see supra note 1, Egan did submit a
functional capacity evaluation in support of Gross's appeal of the
initial denial of her claim, in which the doctor reiterated her
diagnosis of CRPS in Gross's right arm, fibromyalgia, severe
migraines, chronic fatigue, and depression. See Gross I, 734 F.3d
at 21. Egan also reported that Gross's right arm "was colder and
discolored, 'as is seen in complex regional pain syndrome,' and
that Gross 'can hardly raise her arm.'" Id. The doctor also
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We thus concluded that, on the record then before us, we
could not answer the "open question" necessary to resolve the
parties' debate over Gross's entitlement to benefits: "the effect
that the surveillance evidence, when viewed in context, may have
on other evidence indicating disability." Id. at 27. Accordingly,
we remanded the case "so that the parties can further address both
the significance of the video evidence in assessing Gross's
limitations and the veracity of her self-reported and observed
symptoms, particularly concerning the condition of her right arm."
Id. at 27-28.
B. The Evidence Produced on Remand
In the renewed administrative proceedings following
remand, Gross and Sun Life each submitted additional opinions from
two medical professionals, none of which were based on new
examinations of Gross. Sun Life relied primarily on reviews of
Gross's medical file by two neurologists, Drs. David Ross and Rajat
Gupta. Ross provided a nine-page report summarizing Gross's
medical history and concluding that "[t]he medical evidence does
not support a functional impairment as of August 1, 2006" --
Gross's claimed disability date. Ross stated that "[t]here is no
medical explanation for the discrepancy between the reported
stated that Gross's prescription medications limited her work
capacity, leaving her "tired or with trouble thinking, or both."
Id.
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limitations and those seen during surveillance," and he opined
that Gross's "observed activities are more consistent with her
true functional status."
Gupta similarly prepared a report reviewing Gross's
medical history, beginning in March 2004, and responded in the
negative to a question asking whether he detected "any physical
condition(s) supported by the clinical evidence that are
functionally impairing." Gupta questioned the diagnoses of CRPS
or RSD, noting that the symptoms on which those assessments were
based -- including the swelling, discoloration, and temperature of
Gross's right arm and hand -- "are known to be occasionally self-
induced by particularly savvy individuals." Gupta highlighted
Gross's long-sleeved clothing seen in the videos, "which typically
would be avoided by sufferers of CRPS due to the extreme amount of
hypersensitivity typically present," and he noted the "consensus
among most of her providers that there is a psychological component
to [her] presentation."
In an addendum to his report, Gupta stated that Gross's
mother's medical emergency "would not explain the apparent ease
and fluidity of movement that the claimant nonchalantly and
effortlessly display[ed]" with the use of her right arm and hand
as she prepared to drive to the hospital in February 2007 --
although he acknowledged that "[p]ressing circumstances may
conceivably allow an individual to perform physical feats of
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strength and/or endurance that would otherwise be considered
'unachievable.'" On that issue, Sun Life also obtained a follow-
up opinion from Dr. Neuren, who stated that "[i]t is not credible
that going to visit her mother due to illness would result in
resolution of her condition even on a temporary basis. . . . CRPS
is not a part time condition."
Gross's additional medical evidence consisted of two
letters, one from a pain management specialist, Dr. James Murphy,
and one from the physical therapist who had performed her
functional capacity evaluation in 2007, Chris Kaczmarek. Having
reviewed Gross's medical records and the surveillance evidence,
Murphy concluded that nothing in the three noted surveillance
reports and videotapes "would contradict or invalidate the
restrictions and limitations placed upon Ms. Gross by her
physicians." Murphy stated that the physical effects of CRPS and
fibromyalgia "can vary from day to day -- even minute to minute,"
and that the severity of symptoms "are dependent upon numerous
factors, such as medication regimen,[6] response to interventions
6As noted in our earlier opinion, the FCE prepared in January
2007 "lists numerous medications that Gross reported using on a
daily basis: Wellbutrin, Duragesic patches, Klonipin, Tizanadine,
Lortab, Ambien CR, Valtrex, Estrostep FE, Senokot, Tylenol Rapid
Release, Excedrin Tension Headache, and Phaxyme." Gross I, 734
F.3d at 19.
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. . . , physical stress, systemic illness, and underlying
precipitating condition(s)."
Kaczmarek submitted a two-page letter reporting that he
had reviewed Gross's records, the three identified surveillance
reports and videos, and the FCE he had performed in 2007. He
summarily concluded that Gross's activities in the videos were
consistent with his prior findings that she could neither sit "at
a frequency sufficient to engage in sedentary employment" nor
"'exert up to 10 pounds of force' on an 'occasional' basis
sufficient to engage in sedentary employment."7
7 The new information in his letter was as follows:
Based on my professional education,
training and experience, below are my
responses to the questions posed:
1. Based on my review of the
surveillance videos, Ms. Gross' activities are
consistent with my prior examination findings
that she is unable to "sit" at a frequency
sufficient to engage in sedentary employment.
[box labeled "Agree" is checked]
2. Based on my review of the
surveillance videos, Ms. Gross' activities are
consistent with my prior examination findings
that she is unable to "exert up to 10 pounds
of force" on an "occasional" basis sufficient
to engage in sedentary employment.
[box labeled "Agree" is checked]
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C. The District Court's Post-Remand Decision
After briefly surveying the evidence described above,
the district court observed that its task was to decide whether
the surveillance evidence "casts doubt . . . sufficient to
dislodge" the panel's conclusion that the medical evidence
supported Gross's claim of total disability. Gross Remand Op. at
5. To undermine the disability assessment, the court stated,
"would require the videos to show Gross performing activities that
'directly contradict' the self-reported limitations upon which her
treating physicians have offered their diagnoses." Id. (quoting
Gross I, 734 F.3d at 25). The court found no such contradiction,
nor "sufficient evidence that Gross otherwise exaggerated her
symptoms to hoodwink her treating physicians." Id.
Among other factors, the court noted that only one
professional who had both personally examined Gross and reviewed
the surveillance records -- Bhupalam -- had disagreed with the
diagnoses of disabling conditions. But the court discounted
Bhupalam's view because he initially had agreed that Gross was
unable to work, and his later contrary opinion -- after viewing
the surveillance tapes -- was "tempered" by his recommendation
that a follow-up evaluation be performed. Echoing our own
sentiment, the court observed that "[t]his recommendation makes
sense only if the surveillance records did not unequivocally
contradict Bhupalam's initial opinion that Gross was totally
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disabled." Gross Remand Op. at 6; see also Gross I, 734 F.3d at
26. The district court therefore ordered Sun Life to pay Gross
benefits based on a disability date of January 30, 2007.
In a subsequent ruling, the district court determined
that the applicable interest rate for Gross's recovery of benefits
is the rate set by 28 U.S.C. § 1961.8 Previously, the court had
awarded Gross approximately $96,000 in attorney's fees for work
performed in connection with the proceedings leading up to, and
including, the first appeal to this court. The fees determination
followed this court's holding that Gross had achieved a sufficient
degree of success on the merits in Gross I to qualify her for fees
under ERISA. Gross v. Sun Life Assurance Co. of Can. (Gross II),
763 F.3d 73, 81 (1st Cir. 2014). Significantly, our decision in
Gross I changed the standard of review for claims denials under
policies requiring proof of disability "satisfactory" to the
benefits decision-maker. See Gross II, 763 F.3d at 75-76; Gross
I, 734 F.3d at 16. That ruling, which replaced the deferential
arbitrary-and-capricious standard with de novo review,
8Section 1961 calculates interest "at a rate equal to the
weekly average 1-year constant maturity Treasury yield, as
published by the Board of Governors of the Federal Reserve System,
for the calendar week preceding[] the date of judgment." 28 U.S.C.
§ 1961(a) (footnote omitted). Put simply, § 1961(a) adopts "the
rate of interest the government pays on money it borrows by means
of Treasury bills." Jones v. UNUM Life Ins. Co. of Am., 223 F.3d
130, 139 (2d Cir. 2000).
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"strengthen[ed] the entitlement to benefits for employees covered
by such policies." Gross II, 763 F.3d at 85.9
Both parties have appealed from the district court's
judgment. In its briefs to us, Sun Life contends that the record
does not support the court's conclusion that Gross met her burden
to show that she is totally disabled. The insurer also claims
that the district court erred in failing to sanction one of Gross's
attorneys for threatening to sue Bhupalam if he did not withdraw
his revised opinion adverse to Gross. In her cross-appeal, Gross
argues that the district court abused its discretion in choosing
a prejudgment interest rate that does not fully compensate her for
the wrongful denial of benefits. She also asserts that the court
abused its discretion in setting the amount of attorney's fees for
the pre-remand proceedings, which concluded with our decision in
Gross II.
II. Total Disability Finding
A. Standard of Review
Our decision in Gross I established that Sun Life's
denial of benefits was subject to de novo review by the district
court. See 734 F.3d at 16. We recently observed, however, that
the proper standard of appellate review is debatable in a case
9 Gross's motion for attorney's fees for work performed in
connection with the post-remand review of her disability claim was
stayed pending resolution of this appeal, now denominated Gross
III.
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such as this -- i.e., "in an ERISA benefit-denial case that is
presented for decision exclusively on the record of proceedings
before the plan administrator." Stephanie C. v. Blue Cross Blue
Shield of Mass. HMO Blue, Inc., 852 F.3d 105, 111-12 (1st Cir.
2017). Noting that the district court's de novo review of the
administrative record may involve "weigh[ing] the facts,
resolv[ing] conflicts in the evidence, and draw[ing] reasonable
inferences," we acknowledged a plausible argument for applying the
deferential clear-error standard on appeal to the extent the
district court's decision "rests upon factual findings and
inferences therefrom." Id.
We need not reach that issue here, however. Not only do
both parties assume that our review is de novo, but application of
that standard -- more favorable to Sun Life -- nonetheless leads
us to uphold the district court's judgment. We therefore review
the administrative record de novo without affording deference to
the district court's assessment of the record.
B. Discussion
1. Evaluating the Post-Remand Evidence
Sun Life insists that the record as supplemented on
remand reinforces its original determination that Gross did not
prove that she is totally disabled. In sum, it contends that Gross
"failed to produce any evidence related to the[] 'open questions'"
that prompted our remand, namely, "the significance of the video
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evidence in assessing Gross's limitations and the veracity of her
self-reported and observed symptoms." Gross I, 734 F.3d at 27-
28. Accordingly, Sun Life asserts, its own "overwhelming evidence"
that the surveillance undermines Gross's disability claim is
unrefuted and, hence, Gross failed to sustain her burden of proof.
We see the record differently. Sun Life both overstates
the persuasive value of its own post-remand submissions and
sidesteps the fact that we previously found Gross's medical
evidence sufficient to prove her entitlement to benefits. See id.
at 24-25 ("In sum, the sustained and progressive nature of Gross's
complaints, their facial credibility to the medical practitioners
who personally examined her, and the objective symptoms consistent
with RSD . . . support a finding of disability."). In seeking
further development of the record, our objective was to learn
whether, in light of the surveillance, there was reason to
discredit the medical evidence we found adequate to prove total
disability. See id. at 27 (describing "the open question" for
remand as "the effect that the surveillance evidence, when viewed
in context, [has] on other evidence indicating disability"). That
is, we found that Gross had met her burden to show her total
disability, but we sought additional information to help us
determine if the surveillance evidence put forth by Sun Life was
sufficiently probative to undermine Gross's medical evidence.
Regrettably, neither party took full advantage of the opportunity
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to reinforce its position. As we shall explain, Sun Life must
bear the burden of that deficiency because -- as the district court
held -- the insurer failed to show that the surveillance "casts
doubt . . . sufficient to dislodge" our judgment that the medical
record supports Gross's disability claim. Gross Remand Op. at 5.10
For its part, Sun Life did not have Gross reevaluated
and, instead, secured opinions based on reviews of her existing
records and the surveillance. These reports primarily reiterated
what we already knew: Gross engaged in some activities that were
inconsistent with the most severe symptoms and limitations she
described to her doctors during years of treatment for pain, as
well as with the severity and persistence of pain typically
associated with a diagnosis of CRPS or RSD. The central theme of
the new evidence, as Ross put it, is that "[t]he medical evidence
does not support a functional impairment," and, accordingly,
"[t]he claimant's observed activities are more consistent with her
true functional status."
Yet, "[t]he medical evidence" already was before us
during Gross's first appeal, and we found adequate record support
10
In response to the concurrence, the other panel members
assert that we have followed the ordinary practice of "review[ing]
and weigh[ing] the administrative record as a whole." That full-
record review was simply divided between two decisions, with the
current appeal (Gross III) addressing the issue left unresolved in
Gross I: whether the medical evidence in Gross's favor was
undermined by the surveillance evidence. These two decisions did
not alter Gross's burden of proof.
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for her self-reported limitations to conclude, subject to further
insight into the surveillance evidence, that Gross had shown an
entitlement to benefits. Moreover, as noted above, Egan's reports
in the fall of 2006 set the outside range of Gross's abilities as
sitting in one place for two hours, driving for ninety minutes,
standing or walking for an hour, and lifting ten pounds. Gross I,
734 F.3d at 17 & n.19. Even the "particularly troubling"
activities surrounding the hospital visit in early 2007 were not
far removed from those limits, id. at 26, and we observed in our
prior decision that, "[i]n context, the extra driving, the hurried
movements, the pumping of gas may have been at the far edge of
what she could manage with the aid of medication in the face of a
family crisis," id. at 27.
Indeed, Gross told Bhupalam that she can "function
better" after changing her pain medication patch, id. at 20,11 and
a month before the hospital trip she reported using numerous other
medications on a daily basis, see id. at 19. Given the inference
we drew from Bhupalam's addendum that the surveillance activities
were not decisively at odds with a finding of total disability,
Sun Life needed to show that, to the contrary, the capabilities
11She also reported to another doctor, in March 2007, that
"she could lift her arm slightly after changing her pain medication
patch." Gross I, 734 F.3d at 27 n.32.
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Gross demonstrated in the videos were incompatible with the medical
record of disability.
Ross and Gupta's assessments, however, failed to
evaluate the three highlighted surveillance reports in the context
of the entire surveillance investigation and the consistent
perceptions of examining practitioners that her complaints of pain
were genuine. In particular, Sun Life's experts did not explain
the contrast between the more ambitious surveillance activities
that we highlighted and Gross's numerous days of relative
inactivity, a noticeable gap in light of her reports that she could
obtain temporary relief from pain medications.
As described above, the surveillance took place over
nine days, and the investigator saw little activity by Gross on
most of those days. Id. The surveillance began with three days
in November 2006. On November 7, Gross left home at 7:17 AM for
the first of two brief excursions, and she was seen limping when
she returned home at 9:27 AM. On November 8, she was out of the
house for roughly 30 minutes (3:20 PM to 3:51 PM) when she drove
to a shopping center and back. On November 9, the surveillance
showed more activity, albeit only for the morning: Gross took her
stepdaughter to school, briefly went inside the high school,
returned home for a few minutes, and then drove to her mother's
home -- a trip that took a bit more than an hour and a half,
including a rest stop after an hour. She arrived at 11:05 AM, and
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the investigator saw no further activity before he left the area
at 2:15 PM. During the next surveillance period, in January 2007,
Gross did not leave the house at all during two of the three days
(January 10 and 12). Even on January 11, the day she was observed
at Kmart, she was out only from 6:16 PM to 7:14 PM. During the
final surveillance period, in February 2007, described more fully
infra, Gross was either inactive or physically compromised on two
of the days (February 22 and 23), and on February 21 she made the
hospital visit to her mother.
Ross and Gupta thus appeared to treat the most extreme
surveilled activities as decisive over Gross's long history of
credible pain, without confronting her inactivity during most of
the surveillance. Moreover, Sun Life's counsel acknowledged at
oral argument that there is no record evidence that Ross was told
that Gross's travel on February 21 occurred after she learned that
her mother had been taken to the hospital on an emergency basis.12
We recognize that Gupta's addendum refers not only to
the identified episodes, but also to Gross's use of her right hand
on the three successive days of surveillance in November 2006,
including for the purpose of closing a car door and reaching into
12 Sun Life's failure to provide that background would be
contrary to our decision in Gross I, where we observed that
"knowledge of the reason for Gross's unusual travel that day [is]
essential for any reliable appraisal of her medical condition."
734 F.3d at 27.
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her purse, and he notes that she "is seen ambulating fluidly, with
no limp, in all three days." He similarly reports that, during
the three days of surveillance in January 2007, Gross is seen
walking "in a normal manner, using her right hand to brush her
hair off of her face . . . [and] adjust[ing] the shoulder strap of
her purse with the same hand." We consider brief actions by Gross,
on days when she was largely inactive or also manifested
limitations, of minimal significance. Some fluctuation in
physical ability related to such factors as fatigue and the timing
of medications is predictable, see id. at 26, and assessments of
Gross's activities that fail to account for such variations are
necessarily incomplete if not misleading.13 Indeed, the
investigator also saw Gross limping on one of the November days
that Gupta referenced.
13Neuren did state that CRPS is not a "part time condition,"
and in his post-remand report, Gupta opined that the diagnosis of
CRPS was likely wrong because "[n]o amount of pain control of CRPS
would be so successful as to allow the absolutely normal
functioning seen in the[] videos, in my experience." However,
Neuren's general statement does not shed light on what temporary
improvements in functioning could be expected from Gross's
combination of medications. Gupta's statement was muted by his
acknowledgment that "[p]ressing circumstances" might allow someone
to undertake activities "that would otherwise be considered
'unachievable.'" Moreover, even if the diagnosis of CRPS were
incorrect -- as Gupta posited -- Gross's other pain-related
diagnoses would remain, including fibromyalgia and severe
migraines. Neither doctor indicated that pain associated with
those conditions could not be temporarily alleviated with
medication.
- 23 -
Sun Life emphasizes that it offered ample evidence that
the inconsistency between Gross's complaints and the surveillance
indicates that she was either embellishing or self-inducing her
symptoms, or both. Neuren's original report noted both of those
possibilities, id. at 25, and, as described above, Gupta's post-
remand report stated that many of the skin abnormalities associated
with CRPS or RSD that appear in Gross's medical record can be self-
induced. But all of the medical practitioners who actually
examined Gross found her credible, and Neuren and Gupta's
generalized speculation does not explain how Gross could have
deceived so many observers over a substantial period of time14 --
not only doctors, but her co-workers as well.
Even most of Bhupalam's addendum, in which he retreats
from his original finding of disability, consists of nothing more
than what he sees on the videotape. He observes, for example,
that Gross "does not appear to be in any pain or discomfort in the
video recorded on February 21." Bhupalam does not attempt to
explain, however, how to reconcile what can be seen on the
videotapes with his in-person evaluation. In all likelihood, the
14Although it plays no role in our assessment of Sun Life's
benefits decision, we note that the Social Security Administration
determined in August 2008 that Gross "became disabled under our
rules on March 1, 2007," and awarded her benefits.
- 24 -
puzzling dissonance is why he noted that a reevaluation could be
helpful.15
We are frankly puzzled that Sun Life did not act on
Bhupalam's suggestion of a reexamination,16 given our highlighting
of both the believability of Gross's symptoms to medical
practitioners and her co-workers' description of her deteriorating
physical condition while she attempted to remain on the job. In
defending its reliance solely on non-examining physicians, Sun
Life emphasizes that ERISA plan decisionmakers "are not obliged to
accord special deference to the opinions of treating physicians."
Black & Decker Disability Plan v. Nord, 538 U.S. 822, 825 (2003).
But that is not the pertinent principle here. In Black & Decker,
the difference of opinion at issue was between the claimant's
treating physician and an independent medical examiner who also
had personally examined the claimant. Id. at 827. Where the
determination of disability depends on an assessment of largely
15 In his addendum, Bhupalam does note that, despite his
conclusion of total disability based on his examination of Gross,
"there were questions about validity of her sensory examination
and motor examination, especially with weakness and inability to
use her right upper extremity and inability to transfer from the
bed to the chair and bed to examination table, etc., and requiring
full assistance." Those "questions about validity," however, did
not prevent his conclusion of disability.
16 For reasons discussed in Section III infra, Sun Life
probably could not have obtained a reevaluation from Bhupalam. A
physical examination could have been performed, however, by
another medical professional who was given knowledge of the
surveillance.
- 25 -
subjective, self-reported symptoms, those who have had in-person
exposure -- whether treating physician or not -- have access to
information unavailable to non-examining doctors.
To be clear, we are not saying as a general matter that
the views of examining doctors are entitled to more weight than
the opinion of a doctor who performs only a records review.
Indeed, we have held to the contrary. See Orndorf v. Paul Revere
Life Ins. Co., 404 F.3d 510, 526 (1st Cir. 2005) ("Denials of
benefits may be based on review of medical records submitted by
the claimant."); see also Richards v. Hewlett-Packard Corp., 592
F.3d 232, 240 (1st Cir. 2010). However, where the claimant's
credibility is a central factor in the disability
determination -- and particularly where, as here, the claimant's
in-person presentation of symptoms was credited by the independent
medical examiner, Bhupalam -- the impressions of examining doctors
sensibly may be given more weight than those who looked only at
paper records. See, e.g., Kalish v. Liberty Mut./Liberty Life
Assurance Co. of Bos., 419 F.3d 501, 510 (6th Cir. 2005) (giving
little weight to credibility determination by doctor who did not
physically examine claimant "and in contradiction of the . . .
investigator's conclusion that plaintiff was 'very credible'");
cf. United States v. Raddatz, 447 U.S. 667, 679 (1980) (noting
that "courts must always be sensitive to the problems of making
credibility determinations on the cold record"). We thus find
- 26 -
minimal new insight in Sun Life's post-remand submissions, which
fail to provide a "contextualized assessment of the most
significant departures from her professed limitations." Gross I,
734 F.3d at 27 (emphasis added).
Yet, Gross's offerings, too, are less compelling than we
would have anticipated. Neither of her two post-remand reports
was based on a new medical examination, and both were summary in
form. As described above, Murphy, the pain specialist, provided
a one-page letter containing a number of general statements --
e.g., that surveillance in general, and the surveillance of Gross
in particular, is "not a reliable indicator of actual physical
capacity" for someone with CRPS and fibromyalgia, and that the
impact of her conditions "can vary from day to day" and "even
minute to minute" -- but he does not specifically address the gap
between Gross's reported symptoms and her seeming ability at times
to "function quite well" (Bhupalam's words).17 Kaczmarek's new
submission similarly reports that Gross's activities as seen in
the surveillance videos are consistent with his prior findings
that she cannot engage in sedentary employment, but he provides no
explanation for that conclusion.
17
Sun Life correctly points out that the district court
factually erred in describing Murphy as a treating physician. That
mistake, however, has no import for our independent review of the
evidence.
- 27 -
Although Gross's supplemental material responds to the
questions raised in our prior decision, its persuasive force would
have been enhanced if either practitioner had provided some
elaboration of his opinion that the surveillance is consistent
with a finding that Gross is totally disabled. In addition,
although we noted in Gross I that Gross had not "submit[ted] a
statement from her own doctor refuting Sun Life's assertion
. . . that the surveillance 'show[ed] a capacity for activity that
far exceeds' the limitations she claims," 734 F.3d at 27 (second
alteration in original), Gross did not supply such a response on
remand. Sun Life asks us to infer that this omission is because
Egan's comments would be adverse to Gross. We decline to make
that inference in part because it is highly speculative. More
importantly, there is no necessary inconsistency between the
limitations Egan identified in her evaluations of Gross at the end
of 2006 and the surveilled activities. As we have observed, Egan
contemplated the kind of limited activity seen in the videos --
including driving and sitting for extended periods, and lifting
ten pounds -- and Gross's occasional use of her right arm is not
incompatible with Egan's view that it was ordinarily useless. We
nonetheless admonish Gross, along with Sun Life, for submissions
on remand that are less than ideal.
- 28 -
2. Our Conclusion
We have thus gained little additional knowledge from the
remand about the significance of the surveilled activities that
previously gave us pause. In assessing the competing undeveloped
views that have been presented, however, we find more plausible
Murphy's opinion that those activities do not contradict Gross's
medical history because her most extreme symptoms are not always
present. A commonsense view of Gross's maladies -- one not
dislodged by any persuasive contrary medical evidence -- supports
Murphy's statement that "numerous factors" can affect the severity
of her symptoms.
Indeed, the investigator's reports and videos displayed
significant variations in Gross's capacity at times when Gross
would have had no reason to fabricate symptoms.18 Importantly, the
noteworthy departures comprised a small portion of her surveilled
activities, and the surveillance on the day following her most
ambitious activity -- traveling to her suddenly hospitalized
mother -- showed her physically depleted. Id. at 20. When exiting
her residence for her appointment with Bhupalam, Gross walked with
a limp and received assistance from her husband; when leaving the
medical center after roughly two- and one-half hours, she was in
18On the day of her hospital travel, for example, Gross was
seen with a severe limp as she walked from her front door to her
car, before proceeding to the gas station.
- 29 -
a wheelchair, and the investigator observed that Gross appeared
unable to stand on her own. When she got out of the chair, she
limped to the car and appeared to fall in or sit down quickly onto
the passenger seat. That was the day Bhupalam concluded that she
was "totally disabled even for sedentary work even on a part time
basis." Id. The next day, the investigator observed no activity
at all. Id. at 27.
Hence, we think it fair to conclude that Sun Life gave
undue importance to the few occasions when Gross appeared not to
be disabled by her symptoms, leading to a distorted view of her
capacities. When the surveillance is instead viewed in context,
it belies Gross's ability to engage in fulltime employment.
Indeed, she appeared to suffer significant consequences on the two
days that followed the hospital visit (i.e., both the day she was
examined by Bhupalam and the following day, when she apparently
did not leave home). Such adverse physical impact is what one
would expect when an individual with serious medical issues
disregards her doctor's guidelines. That is to say, activity
restrictions do not necessarily define an individual's maximum
capacities on any particular occasion. Rather, prescribed limits
are just as likely intended to protect the individual from
aggravating her physical condition. From that perspective, when
the three days of February surveillance are taken together, they
reinforce, rather than undermine, Gross's claim.
- 30 -
Moreover, the elusive source of Gross's reported
pain -- perhaps fibromyalgia, perhaps RSD or CRPS, perhaps all
three -- gives particular importance to the credibility judgments
of those who examined her. Neuren and Gupta emphatically rejected
the possibility that the pain associated with CRPS could be
sufficiently diminished to allow normal activity, but CRPS is not
Gross's only diagnosis. Gupta noted that, with respect to
fibromyalgia, determining individuals' "degree of impairment . . .
often rests on their credibility." He went on to state that
"[t]here has not been enough credibility established for this
claimant to allow for a determination of impairment to be based
purely on her subjective complaints and allegations." We disagree
with his assessment of the evidence; while Gross's credibility
does find support in the record, the insinuations of fabrication
do not.
To be sure, the record reflects some exaggeration by
Gross, or perhaps selective reporting of her worst-case
experiences. She evidently told Egan in the fall of 2006 that she
"could not . . . use her right hand," id. at 17, and Kaczmarek
also reported that she lacked "functional use of her right arm,"
id. at 18. In January 2007, Gross told Kaczmarek that "she
tolerates short bouts of activity for less than a few minutes" and
has "difficulty walking with frequent falls." Id. at 26. In
November 2007, Egan stated that Gross "can hardly raise her arm."
- 31 -
Id. at 21. As we have seen, Gross plainly can, at times, use her
right hand and arm, and -- whether because of medication or
otherwise -- she can episodically "function quite well." Overall,
however, the medical record depicts an individual afflicted with
chronic severe pain that routinely affects her ability to walk,
bend and sit; whose ability to use her right arm is compromised;
whose pain and fatigue restrict her day-to-day functioning; and
who credibly manifested these conditions during physical
examinations conducted by multiple medical professionals.19
We thus reiterate our conclusion that the medical record
"support[s] a finding of total disability." Id. at 25. Lacking
persuasive evidence that that record inaccurately portrays Gross's
ability to work, we affirm the district court's ruling that Gross
is "entitled to disability benefits from Sun Life." Gross Remand
Op. at 5.
19Sun Life argues that a finding of disability is improper
because several doctors opined that Gross's symptoms were
partially attributable to emotional factors, and she failed to
obtain counseling or behavioral treatment. As noted in our prior
opinion, counseling is a recommended approach for treating the
symptoms of CRPS, Gross I, 734 F.3d at 24, and Egan observed in
September 2006 that depression "certainly is contributing to her
pain," id. at 17 n.18. However, the possibility that psychological
treatment would be helpful does not lead to the conclusion that,
if Gross had pursued counseling, her symptoms would be diminished
to the extent that she could manage a regular workday. See id. at
24 n.31 (quoting a CRPS fact sheet prepared by the National
Institute of Neurological Disorders and Stroke stating that
"[p]eople with CRPS may develop depression, anxiety, or post-
traumatic stress disorder, all of which heighten the perception of
pain and make rehabilitation efforts more difficult").
- 32 -
III. Sanctions
Sun Life argues that the district court abused its
discretion by failing to impose sanctions on one of Gross's
attorneys for interfering with Sun Life's post-remand
investigation of Gross's claim. We begin by describing the conduct
underlying Sun Life's contention.
A. Factual Background
In November 2014, while the renewed administrative
proceedings were ongoing, attorney Michael Grabhorn wrote to
Bhupalam and asked him to complete an addendum, provided with the
letter, that would in effect override Bhupalam's previous addendum
and confirm the doctor's original opinion that Gross's physical
limitations rendered her totally disabled.20 Grabhorn's letter
assumed that, at the time of Bhupalam's examination of Gross, the
doctor had not been provided with some of Gross's medical records
from her treating physicians or given the FCE conducted by
Kaczmarek.21 Grabhorn also stated that Bhupalam had not been "made
aware of the context of Ms. Gross' physical activities observed in
the surveillance videos," including the fact that her travel on
February 21, 2007 was in response to the news that her mother had
20
Grabhorn also questioned whether Bhupalam had personally
prepared the previous addendum, which Grabhorn described as "[t]he
unsigned addendum on your letterhead."
21
Sun Life states in its brief on appeal that Bhupalam did
have the FCE, and Gross does not challenge that assertion.
- 33 -
been taken to the emergency room with chest pains. Grabhorn
included with his letter Kaczmarek's post-remand report confirming
his earlier findings.
Bhupalam did not respond to the November letter, which
was re-sent to him via fax on December 1. In early February 2015,
Grabhorn sent him another letter. The attorney reiterated his
incorrect assertion that Bhupalam had not been provided with all
of Gross's medical records or the FCE, noted that these materials
had been sent with his previous letter, and stated that Bhupalam
had failed to comply with the request that he "amend [his] prior
medical opinion so as to accurately confirm [that] Mrs. Gross'
physical restrictions and limitations precluded her from engaging
in active full-time employment of any kind." In other words,
Grabhorn more directly asked Bhupalam in this letter to withdraw
the April 2007 addendum in which he had changed his opinion of
Gross's ability to work based on the video surveillance. Grabhorn
threatened legal action if Bhupalam failed to "correct[]" his
medical opinions, and he included a draft complaint alleging claims
of negligence, defamation, and fraud, and seeking punitive
damages.
Sun Life learned of these communications several weeks
later when it received a letter from Bhupalam's attorney explaining
that the doctor would not be responding to Sun Life's request for
follow-up comment on Gross's "functionality back in February
- 34 -
2007." After reporting that Grabhorn had threatened to sue
Bhupalam if he failed to retract his addendum, the attorney's
letter continued as follows:
As you can imagine, Dr. Bhupalam does not wish
to be further involved in any way in the
ongoing litigation between Ms. Gross and Sun
Life Financial. Therefore, he respectfully
declines to render any additional opinions
regarding Ms. Gross' condition and would stand
by his addendum report.
B. Discussion
Sun Life argues on appeal that the district court should
have addressed Grabhorn's "unacceptable" actions "in some manner,"
and it asserts that it was harmed because Grabhorn's threat of
legal action kept Bhupalam from responding to Sun Life's request
for clarification of his opinion. In particular, Sun Life states
that it was unable to include in its final decision letter the
fact that Bhupalam had reaffirmed his addendum opining that Gross
was capable of sedentary employment. In urging the need for
sanctions to deter Grabhorn's "bad behavior," Sun Life points to
an unrelated disability case in which Grabhorn was sanctioned for
similar conduct that another court labeled "inexcusable," namely,
making "thinly veiled threats designed to silence the adverse
opinion of an opposing party's witness." Graves v. Standard Ins.
Co., No. 3:14-cv-558-DJH, 2015 WL 5613198, at *2 (W.D. Ky. Sept.
24, 2015). Sun Life also cites two other instances in which
Grabhorn was sanctioned with an assessment of attorney's fees for
- 35 -
vexatious conduct during discovery. See Graves v. Standard Ins.
Co., No. 3:14-cv-558-CRS-DW, 2016 WL 6824403, at *1-3 (W.D. Ky.
Nov. 17, 2016); Pogue v. Nw. Mut. Life Ins. Co., No. 3:14-cv-
00598-CRS, 2016 WL 3748519, at *2-3 (W.D. Ky. July 8, 2016).
Grabhorn's threat of litigation against a potentially
adverse expert is troubling, particularly given that it was not an
aberration. Sun Life, however, provided no assistance to the
district court in evaluating the sanctions question. It merely
argued in its brief in support of its motion for judgment that
Grabhorn's "tampering with a witness . . . should . . . be
sanctioned in a manner deemed appropriate" by the court. Gross v.
Sun Life Assurance Co. of Can., No. 1:09-cv-11678-RWZ, Docket 107,
at 24 (filed Mar. 4, 2016). Sun Life neither addressed the source
for the court's authority to discipline Grabhorn nor provided
examples of measures that would be within that authority.22 Even
22 Sun Life presumably was relying on a federal court's
"inherent power 'to discipline attorneys who appear before it.'"
United States v. Romero-Lopez, 661 F.3d 106, 108 (1st Cir. 2011)
(quoting Chambers v. NASCO, Inc., 501 U.S. 32, 43 (1991)); see
also In re Charbono, 790 F.3d 80, 85-86 (1st Cir. 2015) (observing
that "courts may levy sanctions (including punitive sanctions),"
for "varied purposes," including disciplining attorneys). In some
circumstances, courts also may rely on federal rules or statute.
See Chambers, 501 U.S. at 42-43 (holding that the federal sanctions
provision, 28 U.S.C. § 1927, "and the various sanctioning
provisions in the Federal Rules of Civil Procedure" do not "reflect
a legislative intent to displace the inherent power" (footnote
omitted)).
- 36 -
on appeal, Sun Life does not suggest what sanctions might be
"appropriate."
The decision to impose sanctions is not to be made
lightly. "The Supreme Court has admonished courts to be cautious
in using their inherent power to sanction, explaining that
'[b]ecause of their very potency, inherent powers must be exercised
with restraint and discretion.'" United States v. Romero-Lopez,
661 F.3d 106, 108 (1st Cir. 2011) (quoting Chambers v. NASCO, Inc.,
501 U.S. 32, 44 (1991)). Although harm to an opposing party or
counsel is not a prerequisite, see generally United States v.
Kouri-Perez, 187 F.3d 1, 8-9 (1st Cir. 1999) (discussing "non-
contempt punitive sanctions," including for "harassment of
opposing counsel"), the absence of harm from an attorney's
misbehavior reasonably may play a role in the district court's
decision on whether to undertake the process for imposing
sanctions, see, e.g., Media Duplication Servs., Ltd. v. HDG
Software, Inc., 928 F.2d 1228, 1238 (1st Cir. 1991) ("In general,
a higher standard of due process protection is required where
. . . the sanction is a fine designed to go beyond compensation
and punish an attorney.").
Here, notwithstanding its contention to the contrary,
Sun Life has not demonstrated that it was disadvantaged by
Grabhorn's conduct. The follow-up information that Sun Life sought
from Bhupalam was nonetheless added to the record. Sun Life asked
- 37 -
Bhupalam to comment only on whether knowledge of the reason for
Gross's travel to the medical center "changes your opinion
regarding her functionality on that date." Although Sun Life
complains that Grabhorn's interference resulted in belated
notification that Bhupalam had reaffirmed his addendum, nothing
turns on that delay. Grabhorn's letters and Bhupalam's response
have been available to the district court and on appeal.23
Under these circumstances, and without condoning
Grabhorn's actions, we see no reason to second-guess the district
court's judgment not to award sanctions. Yet Grabhorn's conduct
on appeal makes this a closer issue than it might otherwise be.
In the appellate brief that Grabhorn signed, Gross represents that
the threatening letter was a reaction to multiple unsuccessful
attempts to obtain medical records from Bhupalam. The brief also
states that, "[a]s indicated in her letter, upon Dr. Bhupalam
providing a complete copy of his chart, Ms. Gross agreed to forgo
legal action." Neither of the letters described above, however,
referenced a request for records. To the contrary, the threat of
23Sun Life's timing complaint -- that it was "prevented . . .
from including in its decision letter information specifically
requested by this Court" -- is somewhat disingenuous given that
Sun Life waited until very late in the remand process to seek the
follow-up opinions from both Bhupalam and Neuren that we indicated
could be helpful. Sun Life denied Gross's claim in July 2014, and
Gross filed her response in November 2014. Sun Life sent its
letter to Bhupalam seeking follow-up comment on January 30, 2015.
Sun Life's final decision was issued two weeks later.
- 38 -
legal action was linked to the demand that Bhupalam "correct" his
medical opinions.24
In sum, while we uphold the district court's exercise of
discretion on the matter of sanctions, we consider Grabhorn's
threat of litigation to Bhupalam, and his misrepresentations in
defense of that conduct on appeal, worthy of reproach. Hence, in
our mandate, we will direct the Clerk of Court to send a copy of
this opinion to the Kentucky Office of Bar Counsel for whatever
action, if any, it deems appropriate. See, e.g., Punzalan v.
Holder, 575 F.3d 107, 112 (1st Cir. 2009) (directing the Clerk to
send copies of the opinion to California bar disciplinary
authorities); Aversa v. United States, 99 F.3d 1200, 1216 (1st
Cir. 1996) (referring the matter of attorney conduct to, inter
alia, the New Hampshire Supreme Court's Professional Conduct
Committee).
IV. Prejudgment Interest
In her cross-appeal, Gross argues that the district
court abused its discretion in awarding her prejudgment interest
at the federal statutory rate. See 28 U.S.C. § 1961(a). We
describe the applicable law before turning to Gross's contentions.
24
Moreover, although Grabhorn had in other correspondence
asked Bhupalam for the medical records, he previously had been
told that the doctor would not release them without Sun Life's
permission. Grabhorn did not contact Sun Life to secure that
permission.
- 39 -
A. Availability of Prejudgment Interest
ERISA does not explicitly provide for prejudgment
interest, and whether to grant such a remedy is thus within the
discretion of the district court. Cottrill v. Sparrow, Johnson &
Ursillo, Inc., 100 F.3d 220, 223 (1st Cir. 1996), abrogated on
other grounds by Hardt v. Reliance Standard Life Ins. Co., 560
U.S. 242 (2010). The court's discretion also extends to the rate
of interest to be applied, with the choice to be guided by
equitable factors. Id.; see also Enos v. Union Stone, Inc., 732
F.3d 45, 50 (1st Cir. 2013).
We previously have identified two primary considerations
when a court decides to award prejudgment interest. First, ERISA's
remedial objectives are served by making the plan participant
"whole for the period during which the fiduciary withholds money
legally due." Cottrill, 100 F.3d at 224; see also, e.g.,
Schumacher v. AK Steel Corp. Ret. Accumulation Pension Plan, 711
F.3d 675, 686 (6th Cir. 2013) ("An award that fails to make the
plaintiff whole due to an inadequate compensation for her lost use
of money frustrates the purpose of ERISA's remedial scheme.").
Second, courts should endeavor to prevent unjust enrichment.
Cottrill, 100 F.3d at 224. Awarding interest at a rate that does
not recapture the lost value of the money during the period it was
withheld "would create a perverse incentive" for a defendant to
delay payments while it earned interest on those funds. Pacific
- 40 -
Ins. Co. v. Eaton Vance Mgmt., 369 F.3d 584, 590 n.8 (1st Cir.
2004);25 see also Christianson v. Poly-America, Inc. Med. Benefit
Plan, 412 F.3d 935, 941 (8th Cir. 2005) ("A common thread
throughout the prejudgment interest cases is unjust enrichment --
the wrongdoer should not be allowed to use the withheld benefits
or retain interest earned on the funds during the time of the
dispute." (quoting Kerr v. Charles F. Vatterott & Co., 184 F.3d
938, 946 (8th Cir. 1999))); Rybarczyk v. TRW, Inc., 235 F.3d 975,
986 (6th Cir. 2000) ("To allow the Fund to retain the interest it
earned on funds wrongfully withheld would be to approve of unjust
enrichment." (alteration omitted) (quoting Sweet v. Consol.
Aluminum Corp., 913 F.2d 268, 270 (6th Cir. 1990))). At the same
time, however, the rate should not be so high that it "impose[s]
a punitive measure." Schumacher, 711 F.3d at 686.
In Cottrill, we endorsed the district court's use of the
rate prescribed by § 1961(a), noting that "this rate promotes
25
Although both Cottrill and Pacific Ins. Co. are ERISA cases,
neither involved the precise question we face here. The issue in
Cottrill was the proper accrual date for prejudgment interest.
See 100 F.3d at 224. In Pacific Insurance Co., the issue was
whether the employer's insurer, or the employer itself, should pay
the interest on belated contributions to an employee profit-
sharing plan. 369 F.3d at 585, 590 & 590 n.8. We noted there
that "[t]he interest at issue . . . is, essentially, the
prejudgment interest that a court might have awarded [the
employees] had they elected to litigate their claims for payment
of benefits due under the Plan." Id. at 590 n.8. Given the
related contexts, our observations in those cases are equally
applicable here.
- 41 -
uniformity in ERISA cases" and was "especially appropriate
. . . because the Plan's funds were initially invested in Treasury
bills." 100 F.3d at 225. We emphasized, however, that courts
have "broad discretion" to select the rate, id., "and they may
look to outside sources, including state law, for guidance," id.
at 224-25. In fact, courts have used various benchmarks to
accomplish the dual objectives of making an ERISA plaintiff whole
and avoiding unjust enrichment. See, e.g., Enos, 732 F.3d at 50
(upholding district court's choice of "an interest rate set out in
the parties' own agreement"); Rybarczyk, 235 F.3d at 981, 985-87
(upholding district court's award of the higher of the § 1961(a)
rate or "the rate of return actually earned on the principal amount
of the underpayment during the prejudgment period"); Frommert v.
Lawrence Becker Xerox Corp. Plan Adm'rs, 216 F. Supp. 3d 309, 316
(W.D.N.Y. 2016) (applying the federal prime rate because the state
and federal statutory rates "could result in a windfall for one
side or the other"); Gallagher v. Park West & Trust Co., 951 F.
Supp. 10, 14 (D. Mass. 1997) (applying 12% state law rate).
One complexity in selecting an appropriate rate is the
ever-changing relationship between statutory interest rates and
the actual cost of money. In Schumacher, for example, the Sixth
Circuit held that the district court abused its discretion by
awarding prejudgment interest at the federal statutory rate, which
at that time was 0.12%. See 711 F.3d at 685. The court cited,
- 42 -
inter alia, the then-current annual rate of inflation (2.75%), the
defendant's borrowing costs (7.75%), and the defendant's rate of
return on its investments (6.55%) in concluding that the § 1961(a)
rate was unfairly low, and it directed the district court on remand
to "fashion an award that considers and balances the interests
involved." Id. at 686-87; see also Frommert, 216 F. Supp. 3d at
315 (concluding that the 9% state rate was too high, and the
federal rate at that time, 0.66%, was too low). By contrast, when
we endorsed use of the § 1961(a) rate in Cottrill over Rhode
Island's 12% rate, the federal rate was 4.12%. See 100 F.3d at
224-25; https://www.treasury.gov/resource-center/data-chart-
center/interest-rates/Pages/TextView.aspx?data=yieldYear
&year=1991 ("Treasury website") (for Dec. 31, 1991 accrual date).
In sum, when a district court has concluded that a
plaintiff should be awarded prejudgment interest, its task in
selecting the rate is to identify, in the particular case, a fair
percentage reflecting "both the rationale of full compensation and
ERISA's underlying goals." Cottrill, 100 F.3d at 225.
B. Discussion
Gross asked for a prejudgment interest amount that would
"reflect the actual interest earned by Sun Life on Ms. Gross'
withheld past due LTD benefits" or "interest calculated at her
borrowing rate (e.g. the prime interest rate adjusted for risk of
default)." Gross v. Sun Life Assurance Co. of Can., No. 1:09-cv-
- 43 -
11678-RWZ, Docket No. 109, at 15 (filed Mar. 4, 2016). She
asserted that interest should accrue from January 2007, the date
of her benefits eligibility. The district court, without
explanation, awarded prejudgment interest "from the date of the
filing of the complaint in this action, calculated according to
the method specified in 28 U.S.C. § 1961." Id. at Docket No. 123.
Gross argues that the court abused its discretion in
selecting the federal rate because it is too low to make her whole
"and by extension unjustly enrich[es] Sun Life at Mrs. Gross'
expense."26 She now asserts that the court should have employed
the greater of Massachusetts's interest rate for contractual
obligations (12%), see Mass. Gen. Laws ch. 231, § 6C, or Sun Life's
earnings percentage for the time period at issue. According to
Gross, Sun Life's public filings place the latter above 12% for at
least a portion of the covered period. By comparison, the
§ 1961(a) rate in early October 2009, when Gross's complaint was
filed in federal court, was just 0.37%. See Treasury website
(2009).27 At the time of the district court's judgment in July
2016, it was 0.51%. Id. (2016).
26
Gross does not challenge the court's choice of an accrual
date, which we understand to be October 6, 2009, the date her
complaint was removed to federal court.
27
The Treasury website address listed in Section IV.A can be
altered at the end to access data for other years; i.e., instead
of inserting "&year=1991," insertion of "&year=2009" would
retrieve the 2009 data. The 2016 percentage noted infra is
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Notwithstanding the district court's considerable
discretion in choosing the prejudgment interest rate, its decision
must permit some scrutiny. Here, however, we are unable to
evaluate the court's judgment call because it did not explain its
reasoning, and its rationale is not apparent from the record. Cf.
Enos, 732 F.3d at 50 (rejecting defendant's complaint about lack
of explanation for prejudgment interest award where "it is apparent
from the record that the amount was extrapolated from the rate
stipulated in the CBA and recommended by the [plaintiffs]"). This
is not a case, like Cottrill, where the § 1961(a) rate could be
expected to "approximate[] the likely return on the funds
withheld." 100 F.3d at 225 (describing similar holding in Algie
v. RCA Global Communications, Inc., 891 F. Supp. 875, 899 (S.D.N.Y.
1994)). Moreover, the federal statutory rate is markedly lower
than when we decided Cottrill.28 Also of importance is the lengthy
delay in the benefits payments to Gross -- approaching eleven years
since they should have commenced.
In these circumstances, mechanical adoption of the
§ 1961(a) rate would be an abuse of discretion. Because we cannot
similarly available by changing the concluding portion of the
website address to "&year=2016."
28 The rate dropped under 1% in late 2008 and remained below
that mark until late 2016. In 2017, the rate's low point was 0.79%
and, as of December 29, 2017, the rate was 1.76%. See Treasury
website & supra note 27.
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discern whether the court had supportable reasons for choosing
that rate based on the equities and ERISA's goals, we must vacate
the award of prejudgment interest and remand to the district court
for reassessment or explanation of its interest-rate
determination.
V. Attorney's Fees
ERISA's attorney's fee provision allows a court in its
discretion to award reasonable attorney's fees in benefits
proceedings. See 29 U.S.C. § 1132(g)(1). Following our decision
in Gross I, Gross filed a motion in this court seeking fees and
costs incurred thus far in the case. Given the uncertainty about
Gross's entitlement to attorney's fees under ERISA case law, we
ordered the parties to submit supplemental briefs addressing that
issue. A split panel subsequently decided, in Gross II, that a
fee award was appropriate based on Gross's success in Gross I,
where we held, inter alia, that "our circuit should no longer apply
the highly deferential 'arbitrary and capricious' standard of
review to certain benefits decisions." Gross II, 763 F.3d at 75.
Significantly, the panel majority in Gross II concluded that Gross
had achieved the degree of success required for fees eligibility,
see Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242, 245
(2010), even though she had not yet been found entitled to
disability benefits. See Gross II, 763 F.3d at 79-80. We further
held that her fee request was ripe for adjudication because our
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"remand for reconsideration of her entitlement to benefits, in
combination with a less deferential standard of review, means that
Gross already ha[d] achieved the success that makes her eligible
for fees." Id. at 81.
We did not ourselves perform "[t]he heavily fact-
dependent lodestar analysis" that ordinarily is used to calculate
fee awards, and instead instructed the district court to do so.
Id. at 86. The lodestar approach involves both an assessment of
the lawyer hours reasonably spent on behalf of the prevailing party
and a determination of the reasonable hourly rate for each
attorney. See Matalon v. Hynnes, 806 F.3d 627, 638 (1st Cir.
2015). "Multiplying the results of these two inquiries yields the
lodestar amount," which may then be adjusted "based on factors not
captured in the lodestar calculation." Id.
Utilizing the lodestar analysis, the district court
ordered Sun Life to pay Gross $96,243.50 to cover counsel fees
through her first appeal, including for work on the post-judgment
fee petition that led to our decision in Gross II. See Gross v.
Sun Life Assurance Co. of Can., 105 F. Supp. 3d 130, 140 (D. Mass.
2015). Gross now argues that the fee award -- a reduction of more
than $188,000 from the amount requested -- is unreasonably low,
and she specifically challenges multiple cuts that she claims are
unjustified. She contests, for example, the court's reduction in
the hourly rate of compensation for one of her attorneys, rejection
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of fees for work spent on discovery motions, and the one-third
reduction in the time allowed for her prior appeal of the benefits
denial (i.e., Gross I), and the two-thirds cut in the time for
preparing her fees petition (the matter addressed in Gross II).
We review a district court's ruling on a fee request for
abuse of discretion. Cent. Pension Fund of the Int'l Union of
Operating Eng'rs & Participating Emp'rs v. Ray Haluch Gravel Co.,
745 F.3d 1, 4 (1st Cir. 2014). "This standard is highly
deferential, and 'we will set aside a fee award only if it clearly
appears that the trial court ignored a factor deserving significant
weight, relied upon an improper factor, or evaluated all the proper
factors (and no improper ones) but made a serious mistake in
weighing them.'" Id. (quoting Gay Officers Action League v. Puerto
Rico, 247 F.3d 288, 292-93 (1st Cir. 2001)).
The district court wrote a thorough opinion based on "a
detailed analysis of the submitted billing records." Gross, 105
F. Supp. 3d at 133; see also id. at 136 (noting the court's "line-
by-line review of the billing records"). The court explained its
reasoning for the reductions, and we have carefully reviewed those
judgment calls. For certain of Gross's complaints, it suffices to
say that, given "the latitude ceded to district courts in making
fee awards and the flexibility inherent in the lodestar approach,"
we find no basis for disturbing the court's decision. Matalon,
806 F.3d at 638.
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Although we also find no abuse of discretion in the
court's selected hourly rate for Grabhorn, we nonetheless think it
useful to review our precedent on the choice of an appropriate
rate. We also explain below why two adjustments in the fee award
are necessary.
A. Grabhorn's Hourly Rate
Both Grabhorn, a Kentucky-based ERISA lawyer, and
Jonathan Feigenbaum, a Boston-based ERISA lawyer, sought to
recover fees at a rate of $500 per hour. The district court found
that rate reasonable for Feigenbaum, noting that Boston "hourly
legal fees are among the highest in the country." Gross, 105 F.
Supp. 3d at 135. However, the court concluded that Grabhorn's
compensation should reflect his "normal hourly rate" in Kentucky,
and it therefore awarded him $375 per hour. On appeal, Gross
maintains that both attorneys should have been paid based on the
higher legal fees prevailing in the jurisdiction where the case
was heard, i.e., Boston.
Our court has endorsed the proposition that "reasonable
hourly rates should be set by reference to rates in the court's
vicinage rather than in the lawyer's region of origin." Gay
Officers Action League, 247 F.3d at 296 (citing Adcock-Ladd v.
Sec'y of Treas., 227 F.3d 343, 350 (6th Cir. 2000)); see also,
e.g., United States v. One Star Class Sloop Sailboat, 546 F.3d 26,
38 (1st Cir. 2008) ("Reasonable hourly rates will vary depending
- 49 -
on the nature of the work, the locality in which it is performed,
the qualifications of the lawyers, and other criteria." (emphasis
added)). We also have held, however, that a court may properly
conclude that the prevailing rate in the court's locale is not the
appropriate benchmark in particular circumstances. See One Star
Class Sloop Sailboat, 546 F.3d at 40 ("When a party recruits
counsel from outside the vicinage of the forum court, that court
may deem the relevant community to be the community in which the
lawyer maintains his or her principal office." (internal quotation
marks omitted)); id. (noting that a court may look to an attorney's
"actual billing practices to determine the relevant rate").
Accordingly, our precedent allows a court to choose "counsel's
standard rate, or the prevailing market rate in the forum, or a
reasonable rate in between." Id. at 41.
Given this flexibility, we cannot say the district court
exceeded its authority in determining that Grabhorn's hours should
be compensated at a lower rate than Feigenbaum's. The court
expressly recognized that it could properly award Grabhorn the
Boston hourly rate. See Gross, 105 F. Supp. 3d at 136 (noting
that "Grabhorn's out-of-state status does not, in itself, weigh in
favor of reducing his fee request"). As a matter of discretion,
however, the court concluded that Grabhorn is more appropriately
compensated based on the prevailing rate where he maintains his
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office and was hired by Gross. On the record before us, we find
no basis on which to disturb that judgment.
B. The Fee Petition
In calculating the attorneys' compensation for
litigating Gross's fee petition following our decision in Gross I,
the district court trimmed Gross's request by two-thirds, awarding
fees for only 22.4 of the 67.3 hours claimed. Gross, 105 F. Supp.
3d at 137. The court explained this decision with the conclusory
observation that "[a] fee petition in an ERISA case should be a
straightforward exercise, particularly for experienced ERISA
practitioners like plaintiff's counsel." Id. In the court's view,
the fee petition "could have reasonably been completed in a third
of the time billed by plaintiff's counsel." Id.
The court's characterization of ERISA fee petitions as
"straightforward" may be apt for the ordinary case. See Matalon,
806 F.3d at 639 ("[W]e have indicated that certain components of
fee awards (such as work performed in preparing and litigating fee
petitions) may be calculated at discounted rates due to the
comparative simplicity of the task."). It does not apply, however,
to the petition here. Indeed, as described above, we requested
supplemental briefs on the question whether Gross was entitled to
fees for the proceedings leading up to, and including, our decision
in Gross I -- as well as the proper timing for any such award --
because of the complexity of those issues. The panel divided in
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the decision. See Gross II, 763 F.3d at 86 (dissenting opinion).
Then, once we remanded the case to the district court for the
factbound lodestar analysis, Gross needed to submit additional
materials to that court. In these circumstances, we conclude that
the court erred in treating Gross's fee petition as run-of-the-
mill and, hence, abused its discretion in finding that only 22.4
hours were reasonably expended on that aspect of the litigation.
Having reviewed the billing records ourselves, we are
satisfied that the 67.3 hours billed -- 37.6 by one attorney, 27.7
by another, plus two paralegal hours -- reflect a reasonable
expenditure of time in light of both the difficulty of the legal
questions and the multiple phases of the fee proceedings. Indeed,
the 67.3 total appears to be both an accurate accounting of the
time spent and an appropriate allocation of resources. On remand,
the district court should adjust its calculation of compensable
hours to include the full 67.3 hours for the work on the fees
petition.
C. Summary Judgment
Also problematic in the court's lodestar analysis is its
50% reduction in the attorney hours allowed for summary judgment
work. The court appeared to adjust the compensable time downward,
in part, because of hours "spent on plaintiff's alternative
arguments, many of which were not successful." Gross, 105 F. Supp.
3d at 138. Gross's summary judgment briefing, however, primarily
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challenged Sun Life's benefits decision, a position on which she
ultimately prevailed. Although her memorandum in support of
judgment included some off-the-mark arguments about Sun Life's
experts, it consisted for the most part of ordinary advocacy for
her view of the record. Gross also needed to respond to Sun Life's
cross-motion for judgment. Hence, to the extent the court
discounted the time spent on summary judgment for lack of success,
we conclude that it erred.
However, the court also expressed the view that the total
hours devoted to the summary judgment motions -- 105.5 attorney
hours and 5.5 paralegal hours -- was unreasonable, and we find no
abuse of discretion in that judgment. Accordingly, we conclude
that a 25% downward adjustment in the hours sought would more
accurately reflect both the success Gross achieved on her claim
for benefits and the district court's permissible view that the
total of summary judgment hours was excessive.
We also wish to briefly comment on the district court's
33% downward adjustment for the hours spent on Gross's first
appeal. That reduction was among those made to account for "time
spent pursuing unsuccessful claims and to reflect the quality of
the plaintiff's victories." Id. at 137. Noting Gross's mixed
results in Gross I,29 the district court concluded that it was not
29 The district court accurately described Gross I as follows:
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reasonable to award the full amount of fees sought -- 162.4 hours.
Id. at 138-39. This judgment is within the bounds of the court's
discretion. We concluded in Gross II that "the relative merits of
th[e] action do not line up solely on Gross's side of the
calculus." 763 F.3d at 85. Gross had not at that point established
a right to benefits, and we rejected one of her primary
contentions. See id. In other words, Gross achieved only partial
success in the first round of litigation. Against this backdrop,
we cannot say the district court made "a serious mistake" in
determining the allowable hours for the appeals work. Gay Officers
Action League, 247 F.3d at 293.30
VI. Summary
We uphold the district court's determinations on both of
the issues appealed by Sun Life, affirming the award of disability
benefits to Gross and leaving intact the court's judgment declining
The appeal raised three issues: whether the
ERISA safe harbor exception applied; if not,
what standard of review governed plaintiff's
ERISA claim; and, under that standard, whether
she was entitled to relief. Plaintiff lost on
the first issue, prevailed on the second, and
won a reversal and remand on the third.
Gross, 105 F. Supp. 3d at 139 (citation omitted).
30We note that, with her success on the merits in the post-
remand phase of the litigation, Gross will be eligible for
additional attorney's fees. Her motion requesting a fee award
for post-remand legal work, stayed pending appeal, will now be
reactivated and can be expanded to cover fees incurred for this
appeal.
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to impose sanctions on attorney Michael Grabhorn. On Gross's
cross-appeal, we remand to the district court the question of the
appropriate rate of prejudgment interest. We affirm in part and
vacate in part the district court's attorney's fee calculation.
As explained above, we direct the court to recalculate the fee
award with an additional 44.9 hours for Gross's attorneys' work on
her fee petition and with a 25%, rather than 50%, downward
adjustment in the time for work on the summary judgment motions.
Affirmed in part, vacated in part, and remanded for
further proceedings consistent with this opinion. The Clerk of
Court is directed to send a copy of this opinion to the Kentucky
Office of Bar Counsel. Costs to appellee/cross-appellant.
-Concurring Opinion Follows-
- 55 -
KAYATTA, Circuit Judge. (Concurring) The central
merits issue in this case is whether Ms. Gross was physically
disabled within the meaning of Sun Life's group disability policy.
The law is quite clear that Gross bore the burden of proof on that
issue. See Orndorf, 404 F.3d at 518-19 (characterizing the
conclusion that claimant bears the burden of proving disability as
a "guiding principle" in the appellate court's analysis). It is
also quite clear that in resolving such an issue courts generally
review and weigh the administrative record as a whole. See
Scibelli v. Prudential Ins. Co. of Am., 666 F.3d 32, 40 (1st Cir.
2012). Were we to so proceed on this appeal, I would find that
Gross failed to carry her burden of showing that the evidence as
a whole established her claimed disability. Only one doctor,
Bhupalam, saw Gross and viewed the video. A straight-shooter,
Bhupalam initially deemed Gross disabled. He then reversed his
opinion when shown the video evidence, finding it too incompatible
with Gross's subjectively supported symptoms and limitations. As
best the record shows, Gross either never showed the video to her
own doctors or, if she did, she was unable to get them to confirm
their opinions once they saw the video. Instead, her lawyer set
to trying to muzzle Bhupalam. On such a record, it requires no
undue speculation to figure out what is likely going on. At the
very least, I would find Gross's inability to parry Bhupalam's
post-video opinion with an opinion from any doctor who saw or
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treated her to be a dispositive failure in her effort to carry her
burden.
My colleagues, though, read Gross I as having bifurcated
the usual ERISA merits inquiry. They conclude that some of the
evidence (i.e., the evidence excluding both the video and
conclusions to be drawn from the video) weighs in favor of finding
of disability, and then treat this appeal as a proceeding in which
Sun Life bears the burden of upsetting that conclusion. This
bifurcated parsing of the evidence provides a potent tool for
burden shifting. Here, for example, Gross I found the evidence as
a whole did not justify the entry of judgment for Gross, where the
only doctor who saw both Gross and the video recanted his opinion
after he saw the video. Common sense would suggest that the case
might therefore turn on what Gross's numerous treating physicians
had to say in response, i.e., did they stand by their opinions
once shown the video? Instead, when the treating physicians
remained mum, my colleagues (treating the Bhupalam opinion as old
news) now find that Sun Life needed to do more "to show that . . .
the capabilities Gross demonstrated in the videos were
incompatible with the medical record of disability." While I doubt
that this is a proper way to proceed, I acknowledge that one could
reasonably read Gross I as setting up such a burden-shifting
inquiry. And while I would normally eschew such a reading in the
absence of more express direction (and perhaps some support in the
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case law), I defer here to my colleagues, both of whom were on the
Gross I panel and seem to regard such a reading as plainly manifest
(or at least intended). For this reason alone, I concur.
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