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McBean v. United of Omaha Life Insurance Co.

United States District Court, S.D. California

June 24, 2019

KEITH MCBEAN, Plaintiff,


          Hon. Michael M. Anello United States District Judge.

         Plaintiff Keith McBean, Trustee of the Teresa McGee Living Trust dated January 4, 2012 (“Plaintiff”), filed a motion for attorneys' fees and prejudgment interest shortly after judgment was entered in this case. Doc. No. 59 (“Mtn.”). Defendant By Referral Only, Inc. (“Referral”) filed a response in opposition [Doc. No. 62 (“Oppo.”)], to which Plaintiff replied [Doc. No. 66 (“Reply”)]. The Court found the matter suitable for determination on the papers and without oral argument pursuant to Civil Local Rule 7.1.d.1. Doc. No. 67. For the reasons stated herein, the Court GRANTS IN PART AND DENIES IN PART Plaintiff's motion.

         Relevant Background

         Plaintiff filed this action for relief under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), 29 U.S.C. § 1001 et seq., against Defendants United of Omaha Life Insurance Company (“United”) and Referral alleging causes of action for benefits pursuant to 29 U.S.C. § 1132(a)(1)(B), and for breach of fiduciary duties pursuant to 29 U.S.C. § 1132(a)(3). Doc. No. 14 (“FAC”). The Court previously entered summary judgment in favor of Plaintiff and against Referral on Plaintiff's second cause of action for equitable surcharge for the face value of the Policies, or $143, 550.00, and against Plaintiff on all other claims. Doc. No. 46 (“Order”).

         Motion for Attorneys' Fees

          Plaintiff requests an award of attorneys' fees in the amount of $98, 640.00 pursuant to 29 U.S.C. § 1132(g)(1) because he achieved success on his claim for equitable relief and the factors set forth by the Ninth Circuit in Hummell v. S. E. Rykoff & Co., 634 F.2d 446, 453 (9th Cir. 1980) support a fee award. See Mtn at 6-9. Plaintiff further contends the amount of fees requested is reasonable under the lodestar analysis. Id. at 9-16. Referral opposes an award of attorneys' fees, arguing the factors set forth by Hummell do not support a fee award and if an award is warranted, the fees should be reduced to $40, 590.00. Oppo. at 3-8.

         A. Entitlement to Attorneys' Fees

         ERISA authorizes a court, in its discretion, to award “a reasonable attorney's fee and costs of action to either party.” 29 U.S.C. § 1132(g)(1). Analyzing whether a fee award is appropriate in a particular case is a two-step process. First, the Court must decide whether the litigant “has achieved some degree of success on the merits” that is more than “trivial” or “procedural.” Simonia v. Glendale Nissan/Infiniti Disability Plan, 608 F.3d 1118, 1119 (9th Cir. 2010) (quoting Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242, 255 (2010)). Second, if the litigant has achieved some degree of success on the merits, the Court considers the Hummell factors: (1) the degree of the opposing party's culpability or bad faith; (2) the ability of the opposing party to satisfy an award of fees; (3) whether an award of fees against the opposing party would deter others from acting under similar circumstances; (4) whether the parties requesting fees sought to benefit all participants and beneficiaries of an ERISA plan or to resolve a significant legal question regarding ERISA; and (5) the relative merits of the parties' positions. Hummell, 634 F.2d at 453.

         The Hummell factors “are intended to guide the court's exercise of its discretion, ” but, “none is necessarily decisive; various permutations and combinations can support an award of attorney fees.” Credit Managers Ass'n of S. Cal. v. Kennesaw Life & Accident Ins. Co., 25 F.3d 743, 749 (9th Cir. 1994) (citations and quotation marks omitted). Additionally, courts in the Ninth Circuit “ordinarily grant a prevailing beneficiary in an ERISA action reasonable attorneys' fees and costs, absent special circumstances cautioning against it.” Boston Mut. Ins. v. Murphree, 242 F.3d 899, 904 (9th Cir. 2001).

         1. Some Degree of Success on the Merits

         “[T]he court can fairly call the outcome of the litigation some success on the merits without conducting a lengthy inquir[y] into the question whether a particular party's success was substantial or occurred on a central issue.” Hardt, 560 U.S. at 255 (internal quotation marks omitted). Here, judgment was entered on the second cause of action in favor of Plaintiff and against Referral. Order. The parties do not dispute that Plaintiff achieved some degree of success on the merits. See Oppo. Thus, the Court finds that it has the statutory discretion to award Plaintiff attorneys' fees and turns to weighing the Hummell factors. See Hardt, 560 U.S. at 255; see also Simonia, 608 F.3d at 1121.

         2. Referral's Culpability or Bad Faith

         Plaintiff argues this factor is met because the Court found Referral breached its fiduciary duty by “wrongly advising decedent that she need not do anything other than to continue to pay premiums to maintain her life insurance after she became too ill to continue full-time employment.” Mtn. at 3. Referral essentially argues it did not act in bad faith. See Oppo. at 3-4. “Although bad faith is a factor that would always justify an award, it is not required.” Smith v. CMTA-IAM Pension Trust, 746 F.2d 587, 590 (9th Cir. 1984). Here, the Court did not specifically find that Referral acted in bad faith. See Order at 17-18 (explaining that a statement is a misrepresentation even when the person misinforms by saying that something is true when they do not know whether it is true or not). However, “from a legal perspective, [Referral is] ‘culpable' in that [it was] found to owe Plaintiff a legal duty that [it was] not fulfilling.” See Caplan v. CNA Fin. Corp., 573 F.Supp.2d 1244, 1248 (N.D. Cal. 2008). Accordingly, this factor weighs in favor of awarding fees.

         3. Referral's Ability to Satisfy an Award of Fees

         Referral contends it does not have the ability to satisfy an award of fees. Oppo. at 4. “The relative ability of the parties to satisfy an award of fees is . . . relevant. Generally, when an employee participant brings suit under ERISA, whether it is against the trustees or the employer, the resources available to the pensioner are limited.” Smith, 746 F.2d at 590. Thus, “while the opposing party's inability to satisfy an award weighs against awarding fees, evidence that the opposing party is able to pay does not affirmatively weigh in favor of awarding fees.” Mull v. Motion Picture Indus. Health Plan, No. LA CV 12-06693-VBF, 2017 U.S. Dist. LEXIS 135347, at *19 (C.D. Cal. Feb. 27, 2017).

         Here, Jeff Robbins, the managing director of Referral, declares that Referral “is in financial straits and . . . reports a loss of approximately $45, 000.00 in 2017, a loss of approximately $53, 000.00 in 2018, and for Q1 of the current year, a loss of approximately $49, 000.00.” Doc. No. 62-1 (“Robbins Decl.”) ¶ 4. Robbins further declares Referral cannot afford the judgment entered against it, does not have the ability to raise the money, and “is struggling to stay in business as it is” because “any debt will threaten the continued viability of the company.” Id. Plaintiff avers that this is insufficient evidence of Referral's inability to pay because it does not provide a “clear picture of its financial status.”[1] Reply at 4. For example, Plaintiff asserts that Referral “failed to provide more concrete information such as a financial statement, profit and loss statements or a company balance sheet.” Id. at 4. While Referral's evidence is not overwhelming, Plaintiff presented the Court with no contrary evidence. Thus, the Court finds this factor weighs slightly in favor of Referral.[2]

         4. Deterrence of Others in Similar Circumstances

         This factor requires the Court to consider whether an award of fees against Referral would deter others from similar conduct in the future. Plaintiff argues that because the Court clarified “the duties and obligations as the administrator of the Plan, [Referral] most likely will not be as careless in the future in carrying out those duties.” Mtn. at 9. Referral appears to argue awarding fees would not deter others from similar conduct because the information Referral provided to Decedent was mistaken, not made in bad faith and not purposefully incorrect. See Oppo. at 4 (explaining that Referral is “guilty of committing an honest mistake”). “ERISA does not authorize an award of compensatory or punitive damages for bad faith behavior.” Oster v. Standard Ins. Co., 768 F.Supp.2d 1026, 1033 (N.D. Cal. 2011). “As a result, courts acknowledge that an award of attorneys' fees and costs is a way of deterring violations of ERISA.” Id.; see alsoCarpenters S. Cal. Admin. Corp. v. Russell, 726 F.2d 1410, 1416 (“If defendant employers face the prospect of paying attorney's fees for successful plaintiffs, they will have added incentive to comply with ERISA.”). Here, “an award of fees would not act as a deterrence against bad faith conduct, but it would ...

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