HAHNEMANN UNIVERSITY HOSPITAL v. ALL SHORE, INC.; ALL SHORE, INC. HEALTH PLAN; ALL SHORE, INC. EMPLOYEE BENEFIT PLAN, ALL SHORE, INC.; ALL SHORE, INC. HEALTH PLAN, Defendants/Third-Party Plaintiffs v. PLAN VISTA SOLUTION, formerly NPPN, Third Party Defendant All Shore, Inc. and *All Shore, Inc. Employee Benefit Plan, Appellants
Nos. 05-4628 & 06-1825
UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
January 29, 2008
515 F.3d 257
District Judge: Hon. Clifford Scott Green
PRECEDENTIAL. Argued October 23, 2007. BEFORE: FISHER, STAPLETON and COWEN, Circuit Judges. *Amended pursuant to Clerk‘s Order of 11/23/05. On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. Civil No. 03-cv-04406).
3101 Trewigtown Road
P.O. Box 267
Colmar, PA 18915
Counsel for Appellants
Mark D. Herbert, Esq. (Argued)
Law Offices of Mark Douglas Herbert
2215 Ford Street
Golden, CO 80401-9931
Counsel for Appellee
OPINION
COWEN, Circuit Judge.
Defendants-Appellants, Allshore, Inc. Employee Benefit Plan (Allshore Plan) and Allshore, Inc., appeal from the District Court‘s grant of summary judgment in favor of Plaintiff-Appellee, Hahnemann University Hospital (Hahnemann). The Appellants also appeal the District Court‘s order granting Hahnemann‘s motion for attorney‘s fees and costs. For the following reasons, we will affirm the District Court‘s grant of summary judgment in favor of Hahnemann. However, we will vacate and remand the order granting attorney‘s fees and costs to Hahnemann.
I. BACKGROUND
This case arises out of the medical treatment of a patient at Hahnemann in March 1999. The patient was covered under the Allshore Plan. The Allshore Plan was a health benefit plan administered by Allshore, Inc., and regulated by the Employee Retirement Income Security Act (ERISA). Under the terms of the Allshore Plan, Allshore, Inc. exercised all discretionary authority and control over the administration of the Allshore Plan as well as the management and disposition of plan assets. The plan document gave Allshore, Inc. the ability to hire another agency to perform claims processing and other specified services in relation to the Allshore Plan. However, the plan document stated that if such an agency was hired, it would not be considered a fiduciary of the Allshore Plan. If such an agency was hired, it would not exercise any discretionary authority or responsibility held by Allshore, Inc. Allshore, Inc. hired Benefit Concepts, Inc. (BCI) to act as claims administrator for the Allshore Plan.
In April 1999, Hahnemann submitted a medical bill to the Allshore Plan for approximately $250,000 for the costs incurred with treating the patient at Hahnemann. Hahnemann submitted its bill rather than the patient because the patient assigned her claims for benefits under the Allshore Plan to Hahnemann. BCI received Hahnemann‘s claim because it was the claims administrator of the Allshore Plan. Under the terms of the Allshore Plan, the patient paid a $200 deductible. The Allshore Plan would then pay 80 % of the first $10,000 in charges, and 100% of the charges thereafter.
Hahnemann did not receive a check for the amount it requested, or even an amount applying a 10 % discount. Instead, the managing general underwriter concluded that a 40 % discount was applicable to Hahnemann‘s charges through a different PPO. Specifically, the underwriter determined that the National Preferred Provider Network (NPPN) PPO applied. Thus, Hahnemann only received 60 % (or approximately $150,000) of the charges it originally submitted. Hahnemann received this payment in September 1999.
After receiving payment, Hahnemann questioned the applicability of the 40 % discount because it did not have a contract with NPPN. However, Hahnemann did not know how to question the payment because the explanation of benefits it received accompanying the payment did not state where to submit its claims for administrative review. Eventually, Hahnemann‘s counsel requested review from BCI in April 2000. Hahnemann sought review over whether the 40 % NPPN discount was appropriate for the charges it submitted.
In March 2003, NPPN advised BCI that the discount should not have been applied to Hahnemann‘s claim. After waiting several more months without receiving the balance owed, Hahnemann filed this action against the Allshore Plan and Allshore, Inc. in July 2003. Hahnemann filed its complaint to recover benefits owed pursuant to
After the close of discovery, the parties filed dueling motions for summary judgment. The District Court heard oral argument on the motions on September 14, 2005. On September 15, 2005, the District Court granted Hahnemann‘s motion for summary judgment and denied the Appellants’ motion. It deferred entry of final judgment so that Hahnemann could file a motion regarding attorney‘s fees and costs.
The Appellants subsequently filed a motion for reconsideration and Hahnemann filed a motion for attorney‘s fees and costs. On February 9, 2006, the District Court conducted a hearing on the motion for reconsideration as well as the motion for attorney‘s fees and costs. On February 10, 2006, the District Court granted in part the motion for reconsideration, only to change the judgment amount.1 It denied the motion for reconsideration in all other respects. Also, the District Court granted Hahnemann‘s motion for attorney‘s fees and costs. It awarded Hahnemann $136,182.50 in attorney‘s fees as well as Court costs in the amount of $4,017.26 and $3,372.72 in travel and expense costs.
The Defendants filed a motion to alter or amend judgment. The District Court denied the motion on March 6, 2006. Subsequently, on March 8, 2006, the
II. APPELLATE JURISDICTION AND STANDARD OF REVIEW
We have appellate jurisdiction pursuant to
III. DISCUSSION
On appeal, Appellants raise several issues. First, they assert that the District Court erred in granting summary judgment in favor of Hahnemann because its claim was time-barred. Second, they argue that Hahnemann failed to timely file its claim for administrative review. Third, they assert that material issues of fact precluded the District Court‘s entry of summary judgment because a 10 % discount applied to Hahnemann‘s charges. Fourth, they argue that the entry of a monetary judgment against Allshore, Inc. was improper. Finally, the Appellants make several arguments objecting to the District Court‘s award of attorney fees and costs. Each of these arguments will be considered in turn.
A. Statute of Limitations
Hahnemann claims that it is entitled to recover unpaid benefits pursuant to
The Appellants argue that the plan document contained a one-year limitation period. They assert that this period barred Hahnemann‘s July 2003 complaint, which was filed almost four years after Hahnemann received the improper payment. The Appellants rely on Article X of the plan document entitled, Filing a Claim. Section 7 of that article states that [a]ll claims must be filed with the Plan within the twelve (12) month period from the date of the expense.
We reject Appellants’ assertion that this clause created a contractual statute of limitations on Hahnemann‘s cause of action for benefits under
Next, Appellants allude to the possibility that a three-year statute of limitations barred Hahnemann‘s action. Specifically, they assert that the statute of limitations set forth in
No action may be commenced under this subchapter with respect to a fiduciary‘s breach of any responsibility, duty, or obligation under this part, or with respect to a violation of this part, after the earlier of -
(1) six years after (A) the date of the last action which constituted a part of the breach or violation, or (B) in the case of an omission the latest date on which the fiduciary could have cured the breach or violation, or
(2) three years after the earliest date on which the plaintiff had actual knowledge of the breach or violation.
Second, Appellants assert that Hahnemann failed to timely file its request for administrative review under the terms of the Allshore Plan. Hahnemann filed its request for administrative review in April 2000. This review resulted in NPPN concluding that the 40 % discount did not apply to Hahnemann‘s claim for benefits.
The Allshore Plan states that if one believed that a claim was improperly settled, the following process was available: [w]ithin sixty (60) days of receiving notice of the claim settlement, request a review of the processed claim by written request to the Plan. The Plan will review the processed claim and inform you whether or not an error was made. The Appellants assert that because Hahnemann did not submit its request for administrative review until April 2000 (approximately seven months after receiving the improper payment applying the 40 % discount), it did not comply with the sixty-day time period set out in the Allshore Plan. Hahnemann responds that the document which accompanied the payment applying the 40 % discount fell short of complying with ERISA‘s statutory and regulatory requirements. Thus, Hahnemann asserts that the sixty-day window to apply for administrative review was never triggered.
ERISA states that:
In accordance with regulations of the Secretary, every employee benefit plan shall -
(1) provide adequate notice in writing to any participant or beneficiary whose claim for benefits under the plan has been denied, setting forth the specific reasons for such denial, written in a manner calculated to be understood by the participant, and
(2) afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review by the appropriate named fiduciary of the decision denying the claim.
(1) The specific reason for the denial;
(2) Specific reference to pertinent plan provisions on which the denial is based;
(3) A description of any additional material or information necessary for the claimant to perfect a claim and an explanation why such material or information is necessary; and
(4) Appropriate information as to the steps to be taken if the participant or beneficiary wishes to submit his or her claim for review.
C. Applicability of a 10 % Discount
Third, Appellants assert that the District Court erred in granting summary judgment in favor of Hahnemann because material issues of fact existed regarding the applicability of whether a 10 % discount applied to Hahnemann‘s claim. Specifically, the Appellants allude to contracts between MultiPlan and BCI as well as Donald Rubin, Inc. and BCI. The two MultiPlan agreements relied on by Appellants on appeal were applicable to practitioners. These agreements were not applicable to Hahnemann‘s claim for benefits. Indeed, Mr. Christopher Moyer, the PPO Manager designated by BCI, testified during his deposition that these contracts did not apply to Hahnemann‘s claims.7 Furthermore, Appellants cannot rely on their conclusory statements that Hahnemann had a contract under the Rubin PPO to extend a discount to the charges in this case. See Ridgewood Bd. of Educ. v. N.E. ex rel. M.E., 172 F.3d 238, 252 (3d Cir. 1999)(noting that conclusory allegations do not satisfy a nonmoving party‘s duty to show that a material issue of fact exists once the moving party points to evidence demonstrating that there is no issue of material fact). Thus, there was no material issue of fact with respect to this issue.
D. Judgment Against Allshore, Inc.
Next, Allshore, Inc. asserts that the District Court should not have entered judgment against it as an entity. Recently, we stated that when a plaintiff seeks recovery of benefits pursuant to
When a denial of benefits due arises from a plan administrator‘s breach of its fiduciary obligations to the claimant, Sections
a fiduciary has obligations other than, and in addition to, managing plan assets . . . . For example . . . a plan administrator engages in a fiduciary act when making a discretionary determination about whether a claimant is entitled to benefits under the terms of plan documents . . . . ERISA specifically provides a remedy for breaches of fiduciary duty with respect to the interpretation of plan documents and the payment of claims, one that is outside the framework of the second subsection . . . and one that runs directly to the injured beneficiary. § 502(a)(1)(B).
Varity Corp. v. Howe, 516 U.S. 489, 511-12 (1996)(internal citations omitted and emphasis added). Thus, a breach of these fiduciary obligations will satisfy the limitations set forth in
As previously noted, Allshore, Inc. was the plan administrator and exercised all discretionary authority and control over the administration of the Allshore Plan as well as the management and disposition of plan assets. Thus, Allshore, Inc. was clearly a fiduciary to the plan. See
Upon reviewing the record with respect to the circumstances surrounding the payment (or lack thereof) of benefits to Hahnemann, there is ample evidence to support the finding that Allshore, Inc. breached a fiduciary duty that it owed to Hahnemann as assignee of the patient in this case. See
E. Attorney‘s Fees and Costs
Finally, Appellants contest the District Court‘s award of attorney‘s fees and costs to Hahnemann. The District Court had discretion to award attorney‘s fees to Hahnemann in this ERISA suit. See
These include:
(1) the offending party‘s culpability or bad faith; (2) the ability of the offending parties to satisfy the award of attorney‘s fees; (3) the deterrent effect of an award of attorney‘s fees; (4) the benefit conferred upon members of the [health benefit] plan as a whole; and (5) the relative merits of the parties’ positions.
Martorana v. Bd. Trs. of Steamfitters Local Union 420 Health, Welfare & Pension Fund, 404 F.3d 797, 804 (3d Cir. 2005)(citing Ursic v. Bethlehem Mines, 719 F.2d 670, 673 (3d Cir. 1983)). The Appellants do not argue on appeal that the District Court improperly applied these factors in deciding to award attorney‘s fees. Instead, they make several arguments seeking to reduce the fee award.
A useful starting point for determining the reasonableness of the fee is the lodestar calculation. See United Auto. Workers, 501 F.3d at 290 (citing Hensley v. Eckerhart, 461 U.S. 424, 433 (1983)). Under the lodestar approach, a court determines the reasonable number of hours expended on the litigation multiplied by a reasonable hourly rate. See id. The product of this calculation is a presumptively reasonable fee, but it may still require subsequent adjustment. Id. (citations omitted).
In this case, with one minor exception, the Appellants do not challenge the hourly rate charged. Instead, Appellants assert that the time spent by Hahnemann‘s counsel on certain things should not have been included in the fee award. First, the Appellants assert that the fee award should be proportional to the damage award. Second, they assert that Hahnemann should not have been awarded attorney‘s fees for certain secretarial services performed by Hahnemann‘s counsel. This marks Appellants’ only argument with respect to the reasonableness of the hourly rate (and only applies to certain hours alleged by Hahnemann). Third, Appellants assert that the fee award should be reduced because Hahnemann‘s counsel was from Colorado. They argue that had Hahnemann chosen local counsel, certain fees including researching local rules would not have been incurred. On a related issue,
i. A proportional fee award
First, the Appellants argue that the District Court erred by awarding Hahnemann approximately $136,000 in attorney‘s fees when the summary judgment award was only approximately $100,000. They assert that an attorney‘s fees award in an ERISA case such as this should be approximately one-third of the damage award. We reject this theory. Recently, this Court joined several other Courts in rejecting a proportionality rule for attorney‘s fees awarded under ERISA. See United Auto. Workers, 501 F.3d at 295 (citing Bldg. Serv. Local 47 v. Grandview Raceway, 46 F.3d 1392, 1401 (6th Cir. 1995); Operating Eng‘rs Pension Trusts v. B & E Backhoe, Inc., 911 F.2d 1347, 1355 (9th Cir. 1990); Bd. of Trs. of the Hotel & Rest. Employees, Local 25 v. Madison Hotel, Inc., 43 F. Supp. 2d 8, 14 (D.D.C. 1999)). Thus, we will not disturb the fee award based on this argument.
ii. Fees for certain secretarial services
Next, the Appellants assert that the District Court abused its discretion in awarding Hahnemann attorney‘s fees for secretarial services at the same rate as applied to legal services. Appellants argue that the District Court awarded Hahnemann fees at a legal rate when counsel was only performing secretarial functions, such as typing. However, Hahnemann‘s counsel testified that he does not dictate or handwrite a document and then submit it to his secretary for typing. Rather, he testified that his work is a simultaneous process where a word processor replaces dictation or handwriting. He testified that this process is faster than actually dictating a document, giving it to his secretary for typing, then reviewing and editing the typewritten document. In light of this testimony, we will not disturb the fee award based on this argument.
iii. Attorney‘s fees for time spent researching local rules and for travel costs incurred by Colorado counsel
Third, Appellants argue that they should not have to pay Hahnemann for the time its counsel spent reviewing local rules. Hahnemann‘s counsel was from Colorado. Appellants assert that had Hahnemann chosen local counsel, he would not have had to review the local rules. Upon considering this assertion, we conclude that we will not disturb the fee award based on this argument.
Additionally, Appellants argue that the award to Hahnemann for its Colorado counsel‘s travel and associated expenses was improper. Appellants assert that if Hahnemann retained an equally competent local counsel, these expenses would never have been incurred.9
iv. The lodestar approach versus the contingency fee approach
Fourth, Appellants assert that the evidence demonstrates that Hahnemann‘s counsel charged Hahnemann on a contingent fee basis. Appellants assert that the evidence in this case reflects a contingent fee agreement which would have awarded the Plaintiff‘s attorney substantially less amount. While this statement might be true, it does not provide a basis for this Court to vacate the attorney‘s fee award.
In City of Burlington v. Dague, 505 U.S. 557, 565-66 (1992), the Supreme Court noted that it has generally turned away from the contingent-fee model - which would make the fee award a percentage of the value of the relief awarded in the primary action - to the lodestar model. This is true even though the lodestar model often results in a larger fee award. See id. at 566. Indeed, in Blanchard v. Bergeron, 489 U.S. 87 (1989), the Supreme Court reviewed an attorney fee award under
v. Attorney‘s fees during the pre-litigation administrative process under ERISA
Finally, Appellants assert that the District Court erred in awarding attorney‘s fees to Hahnemann for those fees incurred during the pre-litigation administrative process. ERISA‘s attorney‘s fee provision states that, [i]n any action under this subchapter (other than an action described in paragraph (2)) by a participant, beneficiary, or fiduciary, the court in
As previously noted,
While the Supreme Court has not reached the issue of whether the ERISA attorney‘s fee statutory provision allows for the award of fees incurred during pre-litigation administrative proceedings, its decisions interpreting other fee statutes support our holding today. For example, the Supreme Court has construed the phrase action or proceeding under Title VII to provide for fee awards for administrative proceedings which are not court actions. See N.Y. Gaslight Club, Inc. v. Carey, 447 U.S. 54, 61 (1980); see also, Peterson, 282 F.3d at 121 (comparing the statutory language of Title VII as interpreted by the Supreme Court in N.Y. Gaslight Club, and noting that the ERISA attorney‘s fee statutory provision does not contain the word or proceedings); Cann, 989 F.2d 316 (same). As noted by the Supreme Court, Congress’ use of the broadly inclusive disjunctive phrase ‘action or proceeding’ indicates an intent to subject the losing party to an award of attorney‘s fees and costs that includes expenses incurred for administrative proceedings. N.Y. Gaslight Club, 447 U.S. at 61. Unlike Title VII, the text of ERISA contains no similar reference to ‘proceedings,’ providing strong evidence that Congress did not intend ERISA to have as broad a reach as Title VII. Peterson, 282 F.3d at 121.
Hahnemann cites to Pennsylvania v. Delaware Valley Citizens’ Council for Clean Air, 478 U.S. 546 (1986), to support its position that the award of pre-litigation fees was proper. In that case, the Supreme Court held that, in interpreting a statutory provision authorizing attorneys’ fees, reference to an ‘action,’ rather than an ‘action or proceeding,’ is ‘not a sufficient indication that Congress intended [the fee-shifting provision] to apply only to judicial, and not administrative, proceedings.’ Anderson, 220 F.3d at 453 (citing Del. Valley, 478 U.S. at 559). However, the Sixth, Eighth and Ninth Circuits have all distinguished Delaware Valley because the Supreme Court authorized
Finally, Hahnemann asks us to apply a modified rule as stated in Peterson and Seal v. John Alden Life Insurance Co., 437 F. Supp. 2d 674 (E.D. Mich. 2006). In both cases, the prevailing party was awarded attorney‘s fees for the administrative review fees incurred during a court-ordered remand. See Peterson, 282 F.3d at 122; Seal, 437 F. Supp. 2d at 683-87. However, unlike Peterson and Seal, there was never a court-ordered remand for further administrative proceedings in this case. Therefore, we need not reach the issue of whether Hahnemann‘s so-called modified rule should apply. That issue, is best left to be decided by another court.
In sum, today we join our sister Circuits and hold that awarding a prevailing party attorney‘s fees for pre-litigation administrative proceedings under ERISA is inappropriate. Therefore, we will vacate and remand the District Court‘s attorney‘s fees award so that it can be recalculated in light of this opinion.10
IV. CONCLUSION
In conclusion, we affirm the grant of summary judgment in favor of Hahnemann. However, because the District Court improperly included the amount of time spent by Hahnemann‘s counsel during the pre-litigation administrative process, we vacate and remand the award of attorney‘s fees for further proceedings consistent with this opinion. The award of travel and expense costs is also vacated and remanded for further proceedings because the District Court awarded travel and related expenses to Hahnemann for its counsel located outside of the forum, even though there was no finding that forum counsel would have been unwilling or unable to represent Hahnemann. Finally, because the District Court separately awarded Court costs, as well as and travel and expense costs in its judgment, and the Appellants did not object on appeal to any part of the award of Court costs, we will not disturb the District Court‘s award of Court costs.