LifeCare Management Services LLC v. Insurance Management Administrators Inc. , 703 F.3d 835 ( 2013 )

Case: 11-10733 Document: 00512100808 Page: 1 Date Filed: 01/04/2013
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
January 4, 2013
No. 11-10733 Lyle W. Cayce
Clerk
LIFECARE MANAGEMENT SERVICES LLC,
Plaintiff-Appellee
v.
INSURANCE MANAGEMENT ADMINISTRATORS INCORPORATED,
formerly known as Insurance Management Administrators of Louisiana
Incorporated; BILL & RALPH'S, INCORPORATED; BILL & RALPH'S
INCORPORATED EMPLOYEE BENEFIT PLAN & TRUST,
Defendants-Appellants
------------------------------------------------------------------------------------------------------------
LIFECARE MANAGEMENT SERVICES LLC,
Plaintiff-Appellee
v.
CARTER CHAMBERS L.L.C.; CARTER CHAMBERS L.L.C. EMPLOYEE
BENEFIT PLAN,
Defendants-Appellants
Appeals from the United States District Court
for the Northern District of Texas
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Before KING, SMITH and HIGGINSON, Circuit Judges.
HIGGINSON, Circuit Judge:
A third-party administrator of medical benefits plans denied claims made
on behalf of two patients who received treatment from the same medical
provider. The district court found that (1) the plan administrator incorrectly
interpreted the plans to deny the claims in a way that abused its discretion and
(2) the administrator may be held liable for its wrongful denial. The district
court also awarded attorneys’ fees to the medical provider. We AFFIRM.
1. Facts and Proceedings
Christopher Evans suffered a cervical spine fracture that resulted in
quadriplegia. Evans received treatment at LifeCare Management Services, LLC
(“LifeCare”) in Dallas, Texas for about two-and-a-half months before moving to
a nursing home in July 2005. His medical bills totaled more than $171,000.
Bobby Wall suffered an acute stroke. Wall received treatment at a
LifeCare facility in Shreveport, Louisiana for about two months before passing
away in June 2007.1 His medical bills totaled more than $340,000.
Evans and Wall participated in similar medical benefits plans through
Carter Chambers LLC (“Carter”) and Bill and Ralph’s Inc. (“BRI”), respectively.
Evans was a Carter employee’s dependent and a qualified participant of the
Carter plan. Wall was BRI’s employee and a qualified participant of the BRI
plan. The plans listed Carter and BRI as administrators.
The plans limited reimbursements to “skilled nursing facilities” (“SNFs”).2
The plans used identical language to define an “SNF”:
1
Both Evans and Wall received treatment at hospitals before being transferred to
LifeCare.
2
Evans’ plan capped payments to SNFs at 120 days per injury; Wall’s plan barred
payments to SNFs altogether.
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Skilled Nursing Facility is a facility that fully meets all of these
tests:
(1) It is licensed to provide professional nursing services on an
inpatient basis to persons convalescing from injury or Sickness. The
service must be rendered by a registered nurse (R.N.) or by a
licensed practical nurse (L.P.N.) under the direction of a registered
nurse. Services to help restore patients to self-care in essential daily
living activities must be provided.
(2) Its services are provided for compensation and under the full-
time supervision of a Physician.
(3) It provides 24 hour per day nursing services by licensed nurses,
under the direction of a full-time registered nurse.
(4) It maintains a complete medical record on each patient.
(5) It has an effective utilization review plan.
(6) It is not, other than incidentally, a place for rest, the aged, drug
addicts, alcoholics, mental retardates, Custodial or educational care
or care of Mental Disorders.
(7) It is approved and licensed by Medicare.
The plans further provided in a final sentence that the term “skilled nursing
facility” “also applies to charges incurred in a facility referring to itself as an
extended care facility, convalescent nursing home, rehabilitation hospital, long-
term acute care facility or any other similar nomenclature.”
By contrast, the plans covered reimbursements to hospitals. The plans
defined a “hospital” as:
an institution which is engaged primarily in providing medical care
and treatment of sick and injured persons on an inpatient basis at
the patient’s expense and which fully meets these tests: it is
accredited as a Hospital by the Joint Commission on Accreditation
of Healthcare Organizations or the American Osteopathic
Association Healthcare Facilities Accreditation Program; it is
approved by Medicare as a Hospital; it maintains diagnostic and
therapeutic facilities on the premises for surgical and medical
diagnosis and treatment of sick and injured persons by or under the
supervision of a staff of Physicians; it continuously provides on the
premises 24-hour-a-day nursing services by or under the supervision
of registered nurses (R.N.s); and it is operated continuously with
organized facilities for operative surgery on the premises.
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Carter and BRI contracted with Insurance Management Administrators,
Inc. (“IMA”) to act as a third-party administrator (“TPA”) of claims arising under
the plans. The administration contracts between IMA and Carter and BRI
outlined the scope of IMA’s administrative duties. The contracts allowed IMA
to “[p]rocess all claims presented for benefit under Plan, [. . .] audit claims
processed by selected Insurance Carrier[s] to determine accuracy, distribute
checks in payment of claims to employees or service providers, and provide an
explanation of claim settlements to the Plan Participant and Plan
Administrator.” The contracts also specified that IMA’s duties were “ministerial
in nature” and to be “performed within the framework of policies,
interpretations, rules, practices and procedures” established by the employers.
Referencing the plans’ limits on SNF reimbursements, IMA refused to pay
either Evans’ or Wall’s claims. Longtime IMA claim manager Alana Bennett
denied Wall’s claim by explaining that LifeCare did “not meet the definition of
a hospital as defined in the plan” because LifeCare “is a rehab facility as defined
in the plan,” and the plan did “not have rehab benefits.” Bennett denied Evans’
claim by explaining that LifeCare was an SNF because it satisfied the first and
sixth factors of the plan’s seven-part SNF test: LifeCare helped Evans
“convalesce from an injury” and was “licensed as a specialty hospital.” Bennett
also indicated to Evans that LifeCare qualified as an SNF under the plan’s final
sentence elaborating on SNFs because LifeCare was a long-term acute care
facility (“LTAC”).3
Bennett testified at her deposition that, even if a facility referred to itself
as an LTAC, it would still have to meet each of the seven SNF factors to qualify
as an SNF under the plan. She also testified that she denied LifeCare’s claims
because LifeCare did not meet the plans’ seven-factor test.
3
Evans and Wall assigned to LifeCare their claims against IMA by signing a “consent
to treatment” form.
4
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After IMA denied Wall’s and Evans’ claims, LifeCare filed separate
lawsuits against IMA, BRI, the BRI Plan, Carter, and the Carter Plan alleging
that they wrongfully denied Wall’s and Evans’ claims under the Employee
Retirement Income Security Act (“ERISA”). LifeCare also raised related state
law claims.
The district court consolidated the cases. The parties filed motions for
summary judgment. The district court granted summary judgment for IMA,
BRI, the BRI Plan, Carter, and the Carter Plan on LifeCare’s state law claims,
but granted summary judgment for LifeCare on its ERISA claims. The district
court found that IMA incorrectly interpreted the plans to categorize IMA as an
SNF in a way that abused its discretion. The district court also found that
LifeCare could maintain a claim against IMA as a TPA. The district court
awarded LifeCare benefits payments in excess of $512,000 and attorneys’ fees
totaling more than $453,000.
IMA, BRI, the BRI Plan, Carter, and the Carter Plan (the “Appellants”)
raise three issues on appeal: (1) whether the district court erred in finding that
IMA incorrectly interpreted the plans to deny payments to LifeCare in a way
that abused its discretion; (2) whether the district court erred in finding IMA
liable for its handling of LifeCare’s claim; and (3) whether the district court
erred in awarding attorneys’ fees to LifeCare.
2. Standard of Review
This court reviews a grant of summary judgment de novo, applying the
same standards as the district court. Trinity Universal Ins. Co. v. Emp’rs Mut.
Cas. Co., 592 F.3d 687, 690 (5th Cir. 2010). We therefore affirm the district
court’s grant of summary judgment “if, viewing the evidence in the light most
favorable to the non-moving party, there is no genuine dispute [as] to any
material fact and the movant is entitled to judgment as a matter of law.” U.S.
ex. rel. Jamison v. McKesson Corp., 649 F.3d 322, 326 (5th Cir. 2011).
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3. IMA’s Interpretation of the Plans
We limit our review of the interpretation of a benefits plan under ERISA
to the administrative record. See Vega v. Nat’l Life Ins. Servs., Inc., 188 F.3d 287,
299 (5th Cir. 1999) (en banc), overruled on other grounds by Metro. Life Ins. Co.
v. Glenn, 554 U.S. 105 (2008); Estate of Bratton v. Nat’l Union Fire Ins. Co. of
Pittsburgh, 215 F.3d 516, 521 (5th Cir. 2000). In evaluating the record to
determine whether the interpretation of a plan is “legally correct,” we consider:
“(1) whether the administrator has given the plan a uniform construction, (2)
whether the interpretation is consistent with a fair reading of the plan, and (3)
any unanticipated costs resulting from different interpretations of the plan.”
Crowell v. Shell Oil Co., 541 F.3d 295, 312 (5th Cir. 2008). “[W]hether the
administrator gave the plan a fair reading is the most important factor.” Stone
v. UNOCAL Termination Allowance Plan, 570 F.3d 252, 260 (5th Cir. 2009); see
also Crowell, 541 F.3d at 313. An administrator’s interpretation is consistent
with a fair reading of the plan if it construes the plan according to the “plain
meaning of the plan language.” Threadgill v. Prudential Sec. Grp., Inc., 145 F.3d
286, 292 (5th Cir. 1998); see also Stone, 570 F.3d at 260.
If this court finds that an administrator’s interpretation of a plan is
incorrect, then we consider whether the interpretation was an abuse of
discretion. Chacko v. Sabre, Inc., 473 F.3d 604, 611 (5th Cir. 2006); see also
Crowell, 541 F.3d at 312. A plan administrator abuses its discretion “[w]ithout
some concrete evidence in the administrative record that supports the denial of
the claim.” Vega, 188 F.3d at 302. Abuse of discretion factors include: “(1) the
internal consistency of the plan under the administrator’s interpretation, (2) any
relevant regulations formulated by the appropriate administrative agencies, and
(3) the factual background of the determination and any inferences of lack of
good faith.” Gosselink v. Am. Tel. & Tel., Inc., 272 F.3d 722, 726 (5th Cir. 2001).
However, “if an administrator interprets an ERISA plan in a manner that
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directly contradicts the plain meaning of the plan language, the administrator
has abused his discretion even if there is neither evidence of bad faith nor of a
violation of any relevant administrative regulations.” Id. at 727.
Here, IMA’s interpretation of the plans was incorrect because its finding
that LifeCare was an SNF was inconsistent with a fair reading of the plans.4
The plans state that an SNF “is a facility that fully meets all of” the seven SNF
tests. IMA has acknowledged that, absent its interpretation of the final
sentence, a facility must meet all seven factors to qualify as an SNF. Yet IMA’s
denial of Evans’ full claim references only two of the seven factors; its denial of
Wall’s claim does not reference a single factor.
IMA instead argues that it interpreted the plans correctly by categorizing
LifeCare as an SNF under what IMA contends is an alternative definition of an
SNF, which IMA contends is independent of the seven factors, which an SNF
otherwise would “fully” have to meet. IMA contends that this final sentence in
fact is an “alternative” and “independent” second definition of an SNF that
allows it to categorize a medical provider as an SNF if the provider refers to
itself as an LTAC or rehab hospital, and that LifeCare referred to itself as both.
IMA observes that it denied Wall’s claim by stating that LifeCare was “a rehab
facility as defined in the plan.” IMA adds that it denied Evans’ full claim by
quoting the final sentence, and by describing LifeCare as “an extended care/long
term acute care facility.”
However, a fair reading of these specific plans shows that the final
sentence does not permit IMA to categorize LifeCare as an SNF solely because
LifeCare refers to itself as an LTAC. First, the plain language of the
sentence—“[t]his [SNF] term also applies to charges incurred in a facility
4
The district court observed that the “uniform construction” factor “slightly favor[ed]”
the Appellants, and that the “unanticipated costs” factor was “neutral.” The parties neither
dispute nor discuss at length in their briefs the district court’s findings on these two factors.
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referring to itself as” an LTAC—provides that a facility cannot be excepted from
classification as an SNF merely by referring to itself as an LTAC instead of an
SNF. The sentence, by its plain language and logically, clarifies that an SNF by
any other name is still an SNF: a facility must “fully meet[ ] all of” the seven
factors to qualify as an SNF, even if it refers to itself as an LTAC. Notably, the
sentence in question, by its explicit language, clarifies that the “term” SNF
encompasses facilities that use nomenclature other than SNF. The final,
clarifying sentence, with its antecedent being the “term” SNF, offers no
“alternative” or “independent” or “second” catch-all definition of an SNF.
To the extent that the plans’ texts were ambiguous, Bennett’s testimony
supports our reading of its terms.5 Bennett testified that she denied Evans’ and
Wall’s claims because LifeCare qualified as an SNF under the plans’ seven-factor
test. IMA challenges this reading of Bennett’s deposition testimony as
“tortured.” IMA instead argues that Bennett said only that LifeCare was an
SNF under the final sentence and that, alternatively, she did not understand
counsel’s question. However, the transcript of the deposition shows that
counsel’s questions and Bennett’s answers were clear.6 Otherwise, a facility that
happened to describe itself as a “Long-Term Acute Care” provider would qualify
as an SNF under the final sentence regardless of the type of services it provided.
A fair reading of the plans shows that IMA’s interpretation categorizing
LifeCare as an SNF without applying each of the seven SNF factors was
5
We do not base our interpretation of the plans on Bennett’s testimony because her
statements were made outside of the administrative record. However, Bennett’s explanation
that she rejected Evans’ and Wall’s claims by relying on the seven-factor test, and not the final
clarification sentence, confirms our reading of the record.
6
Counsel asked Bennett: “So you believe that because IMA and you in particular found
that LifeCare was a skilled nursing facility, that all seven elements of those were met at the
time you made the decision with regard to Mr. Wall's medical benefits as well as Mr. Evans’
medical benefit?” Bennett replied: “Yes, yes, I think -- yes.” Counsel asked again whether the
seven-factor test was the reason “in toto” that Bennett rejected Evans’ and Wall's claims.
Bennett answered “[y]es.”
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incorrect, as found by the district court. As a result, we must address whether
this incorrect interpretation is an abuse of discretion.
IMA’s interpretation of the plans was an abuse of discretion because IMA’s
categorization of LifeCare as an SNF “directly contradict[ed] the plain meaning
of the plan language” under the “factual background” abuse of discretion prong.
See Gosselink, 272 F.3d at 726-27. As discussed above, the plain language of the
plans provides that, even if a medical provider refers to itself as an LTAC, it may
be an SNF entitled to limited or no reimbursement if it “fully meets all of” the
seven factors set forth. IMA’s interpretation of the plans to categorize LifeCare
as an LTAC solely because it referred to itself as one contradicted the plans’
plain language. Accordingly, we do not need to consider the other two abuse of
discretion factors. See Gosselink, 272 F.3d at 727. LifeCare did not provide
“concrete evidence” that LifeCare met each of the seven factors. IMA's letter
denying Evans’ claim referenced only two of the seven factors; its letter denying
Wall’s claim did not mention a single factor. IMA’s counsel forthrightly
acknowledged: “. . . I don't have anything in the record that says we have gone
through the seven-element analysis . . . .”
In sum, IMA incorrectly interpreted the plans because it categorized
LifeCare as an SNF without finding that LifeCare “fully meets all of” the plans’
seven SNF factors. IMA abused its discretion because categorizing LifeCare as
an SNF without considering the seven-factor SNF test contradicted the plain
language of the plans.
4. IMA’s Liability
An ERISA claimant may bring a lawsuit under 29 U.S.C. § 1132(a)(1)(B)
“to recover benefits due to him under the terms of his plan.” Schadler v. Anthem
Life Ins. Co., 147 F.3d 388, 394 (5th Cir. 1998). This court has found that a
claimant may bring a suit against an employer when the plan has no meaningful
existence apart from the employer, and when the employer made the decision to
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deny benefits. Musmeci v. Schwegmann Giant Super Markets, Inc., 332 F.3d
339, 349-50 (5th Cir. 2003).7
We start with the language of the statute. The plain language of §
1132(a)(1)(B)—permitting an action “to recover benefits due to him under the
terms of his plan, to enforce his rights under the terms of the plan, or to clarify
his rights to future benefits under the terms of the plan”—does not limit the
scope of defendants that a claimant may bring a lawsuit against.8
We next look to our sister circuits. At least four circuits have found that
entities other than the benefits plan or the employer plan administrators may
be held liable under § 1132(a)(1)(B). See Cyr v. Reliance Standard Life Ins. Co.,
642 F.3d 1202, 1206 (9th Cir. 2011) (en banc) (finding that “potential defendants
in actions brought under § 1132(a)(1)(B) should not be limited to plans and plan
administrators”); Mein v. Carus Corp., 241 F.3d 581 , 585 (7th Cir. 2001) (“While
it is silly not to name the plan as a defendant in an ERISA suit, we see no . . .
reason to have this case stand starkly for the proposition that the plan is always
the only proper defendant . . . .”); Layes v. Mead Corp., 132 F.3d 1246, 1249-50
(8th Cir. 1998) (finding that a non-employer plan administrator with
discretionary authority could be held liable); Daniel v. Eaton Corp., 839 F.2d
263, 266 (6th Cir. 1988) (same).
The Appellants argue that the Seventh and Eleventh Circuits have limited
liability under § 1132(a)(1)(B), but the cases they rely on are distinguishable
7
Whether liability extends to a TPA is an issue of first impression for us. See Bernstein
v. Citigroup Inc., No. 3:06 CV 209 M., 2006 WL 2329385, at *4 (N.D. Tex. July 5, 2006).
8
The Supreme Court has observed that 29 U.S.C. § 1132(a)(3), a provision similar to
§ 1132(a)(1)(B), does not limit possible defendants. See Harris Trust & Sav. Bank v. Salomon
Smith Barney, Inc., 530 U.S. 238, 246-47 (2000); Cyr v. Reliance Standard Life Ins. Co., 642
F.3d 1202, 1206 (9th Cir. 2011) (en banc) (“We see no reason to read a limitation into §
1132(a)(1)(B) that the Supreme Court [in Harris Trust] did not perceive in § 1132(a)(3).”). The
Supreme Court also observed that other provisions of ERISA expressly address who may be
a defendant. See Harris Trust, 530 U.S. at 246-47.
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from the facts here. In Howard v. Parisian, Inc., 807 F.2d 1560, 1564-65 (11th
Cir. 1987), the Eleventh Circuit addressed only whether ERISA preempts state
law claims against non-fiduciary plan administrators, not whether a TPA may
be held liable under § 1132(a)(1)(B). In Baker v. Big Star Division of the Grand
Union Co., 893 F.2d 288, 290 (11th Cir. 1989), the administrator did not have
the authority to deny benefits. Likewise, in Harris Trust & Savings Bank v.
Provident Life & Accident Insurance Co., 57 F.3d 608, 613 (7th Cir. 1995), the
administrator did not exercise discretion over the claims process.9
Notably, courts finding liability under § 1132(a)(1)(B) nonetheless apply
a restrained functional test: a party will be exposed to liability only if it exercises
“actual control” over the administration of the plan. See Musmeci, 332 F.3d at
349-50 (finding that an employer that makes benefits decisions, and has no
meaningful existence apart from the plan, may be held liable); Garren v. John
Hancock Mut. Life Ins. Co., 114 F.3d 186, 187 (11th Cir. 1997) (per curiam) (“The
proper party defendant in an action concerning ERISA benefits is the party that
9
District courts in our circuit interpreting § 1132(a)(1)(B) have split in extending
liability to entities other than the plan or employer plan administrators, but more recent
decisions favor finding that liability may attach. See Bernstein, 2006 WL 2329385, at *7 (“In
light of . . . the plain text of ERISA, and the abundance of circuit authority authorizing such
suits, the Court holds that a claim under § 1132(a)(1)(B) is not per se limited to plan
defendants.”); Laura Franklin v. AT&T Corp., No. 3:08–CV–1031–M, 2008 WL 5156687, at *3
(N.D. Tex. Dec. 9, 2008) (finding that a TPA with “substantial, if not total, responsibility in
evaluating what benefits were payable under the Plan” could be held liable); Am. Surgical
Assistants, Inc. v. Great W. Healthcare of Tex., Inc., No. H–09–0646, 2010 WL 565283, at *3-4
(S.D. Tex. Feb. 17, 2010) (finding that a TPA was a proper ERISA defendant). This may be
because many of the older district court decisions relied on the Ninth Circuit’s holding in
Gelardi v. Pertec Computer Corp., 761 F.2d 1323, 1324 (9th Cir. 1985) (per curiam) that
“ERISA permits suits to recover benefits only against the plan as an entity.” See Powell v.
Eustis Eng’g Co., No. Civ.A. 02-1259, 2003 WL 22533650, at *2 (E.D. La. Nov. 6, 2003) (finding
that “district courts in this circuit have agreed with the Ninth Circuit [in Gelardi] that the
Plan is the only proper defendant in a suit to recover benefits”). However, the Ninth Circuit’s
recent en banc holding in Cyr, discussed above, overruled Gelardi, finding that “potential
liability under 29 U.S.C. § 1132(a)(1)(B) is not limited to a benefits plan or the plan
administrator.” Cyr, 642 F.3d at 1206-07.
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controls administration of the plan.”); Gore v. El Paso Energy Corp. Long Term
Disability Plan, 477 F.3d 833, 842 (6th Cir. 2007) (finding that an employer
administrator was not liable because it did not control the claims process).
Courts extending liability to entities other than a benefits plan or an employer
plan administrator likewise apply this functional approach. Layes, 132 F.3d at
1249-50 (finding that an administrator with discretionary authority could be
held liable); Daniel, 839 F.2d at 266 (same); Pippin v. Broadspire Servs., Inc., No.
Civ.A. 05-2125, 2006 WL 2588009, at *2 (W.D. La. Sept. 8, 2006) (finding that
“an examination of [the TPA’s] role in denying [the plaintiff’s] benefits claim is
essential in order to determine whether it is a proper party”); Kellebrew v.
UNUM Life Ins. Co. of Am., Civ. Action No. H–06–0275, 2006 WL 1050664, at
*2 (S.D. Tex. Apr. 20, 2006) (refusing to dismiss a benefits claim against an
administrator that “actually administers” the plan).
We find the rationale and cases holding that a TPA may be held liable only
if it exercises “actual control” over the benefits claims process convincing. We
agree that “[t]he proper party defendant in an action concerning ERISA benefits
is the party that controls administration of the plan” and that “[i]f an entity or
person other than the named plan administrator takes on the responsibilities of
the administrator, that entity may also be liable for benefits.” Gomez-Gonzales
v. Rural Opportunities, Inc., 626 F.3d 654, 665 (1st Cir. 2010) (internal citations
omitted). Neither the statute nor caselaw directs that § 1132(a)(1)(B) should
insulate an entity from liability merely for being a TPA. See Harris Trust, 530
U.S. at 245 (rejecting argument that “absent a substantive provision of ERISA
expressly imposing a duty upon a nonfiduciary party in interest, the
nonfiduciary party may not be held liable under . . . one of ERISA’s remedial
provisions”). Where a TPA exercises control over a plan’s benefits claims
process, and exerts that control to deny a claim by incorrectly interpreting a plan
in a way that amounts to an abuse of discretion, liability may attach. See Cyr,
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642 F.3d at 1207 (extending liability under § 1132(a)(1)(B) to entity responsible
for paying legitimate claims where plan administrator “had nothing to do with
denying [plaintiff’s] claim for increased benefits”).
As a result, we proceed to consider whether IMA exercised actual control
over the denial of Evans’ and Wall’s claims. Here, the administration contracts
between Carter and BRI provided that:
[T]he services to be performed by the [TPA] shall be ministerial in
nature and shall be performed within the framework of policies,
interpretations, rules, practices and procedures made or established
by the Plan Administrator . . . . [and] that the [TPA] shall not have
discretionary authority or discretionary controls respecting
management or disposition of the assets of any trust fund and shall
not have authority to, nor exercise any control respecting
management or disposition of the assets of any trust fund.
“[T]he mere exercise of physical control or the performance of mechanical
administrative tasks generally is insufficient” for liability under § 1132(a)(1)(B).
Gomez-Gonzales, 626 F.3d at 665. However, IMA also had authority to “[p]rocess
all claims presented for benefit under [the] Plan.” IMA acknowledged that it
would not consult with BRI or Carter to resolve a claim unless a “gray area”
presented itself. IMA also admitted that it determined that Evans’ and Wall’s
claims were “routine” and therefore did not refer them to BRI or Carter. IMA
was thus responsible for, first, interpreting the plans to determine whether the
claims at issue were routine or non-routine, and, second, interpreting the terms
of the plans to deny Evans and Wall benefits. See IT Corp. v. Gen. Am. Life Ins.
Co., 107 F.3d 1415 (9th Cir. 1997) (“[I]t is hard to say that [the claims processor]
has no power to make decisions about plan interpretation, because [the claims
processor] has to interpret the plan to determine whether a benefits claim ought
to be referred back.”). In so doing, IMA’s actions distinguish it from those cases
in which administrators were found not liable for performing only non-
discretionary functions. See Provident Life & Acc. Ins. Co., 57 F.3d at 613
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(finding claims administrator not liable where administrator could “elect to
advance benefits” but it was employer who “retain[ed] the right . . . to decide all
disputed and non-routine claims”); Baker, 893 F.2d at 290 (claims processor not
liable where it “ha[d] not been granted the authority to review benefits denials
and make the ultimate decisions regarding eligibility”).
This case would be different had the administration contracts not given
IMA the power to deny claims IMA considered routine. Had IMA referred all
disputed claims to BRI and Carter for resolution it would not now be liable for
having exercised discretionary authority in denying Evans’ and Wall’s benefits
claims. Alternatively, if the administrative record had included evidence that
BRI and Carter had furnished IMA with an interpretation of the term “skilled
nursing facility,” IMA might credibly have argued that it did not apply its own
interpretation, but only applied that of the plan administrators.
We find that the district court correctly held that LifeCare could maintain
an action against IMA pursuant to § 1132(a)(1)(B) and that IMA was liable for
exercising actual control over the claims process.10
10
IMA also argues that it is not a proper defendant because it is not a “fiduciary” under
the plans. Yet § 1132(a)(1) does not include a fiduciary requirement, and LifeCare did not
bring a breach of fiduciary duty claim. Moreover, we have previously held that “[w]hen a
beneficiary wants what was supposed to have been distributed under a plan, the appropriate
remedy is a claim for denial of benefits under § 502(a)(1)(B) of ERISA rather than a fiduciary
duty claim brought pursuant to § 502(a)(3).” McCall v. Burlington N./Santa Fe Co., 237 F.3d
506, 512 (5th Cir. 2000). To the extent IMA’s argument refers to the fact that various courts
reference fiduciary relationships in reviewing denial of benefit claims, see, e.g., Pippin, 2006
WL 2588009, at *2-3 (proper defendant in denial of benefits action was fiduciary of plan that
maintained discretionary authority over plan), we observe that “ERISA defines [a] party as
fiduciary only to the extent that he acts in such a capacity in relation to the plan,” Bank of La.
v. Aetna U.S. Healthcare Inc., 468 F.3d 237, 243 (5th Cir. 2006) (quoting Pregram v. Herdrich,
530 U.S. 211, 225-26 (2000) (internal quotation marks omitted)). Having concluded that IMA
was responsible for interpreting the plans to deny Evans’ and Wall’s claims, we find that IMA
exercised discretionary authority sufficient to establish a fiduciary relationship with the plan.
14
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5. LifeCare’s Attorneys’ Fees Award
This court reviews an award of attorneys’ fees for abuse of discretion,
reviewing factual findings for clear error and legal conclusions de novo.
Dearmore v. City of Garland, 519 F.3d 517, 520 (5th Cir. 2008).
Pursuant to 29 U.S.C.§ 1132(g)(1) of ERISA, this court “in its discretion
may allow a reasonable attorney’s fee and costs of action to either party” so long
as the party has achieved “some degree of success on the merits.” Hardt v.
Reliance Standard Life Ins. Co., 130 S. Ct. 2149, 2151 (2010) (“This Court’s
‘prevailing party’ precedents do not govern here because that term of art does
not appear in § 1132(g)(1).”). A party satisfies this “success on the merits”
requirement “if the 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.’” Id. at 2158 (internal quotations omitted).
This court has assessed attorney’s fees under ERISA in the past by
applying the five-factor test from Iron Workers Local No. 272 v. Bowen, 624 F.2d
1255, 1266 (5th Cir. 1980). However, the Supreme Court has clarified that we
do not need to consider the Bowen factors. Hardt, 130 S. Ct. at 2158 (“Because
these five factors bear no obvious relation to § 1132(g)(1)’s text or to our fee-
shifting jurisprudence, they are not required for channeling a court’s discretion
when awarding fees under this section.”); see also 1 Lincoln Fin. Co. v. Metro.
Life Ins. Co., 428 F. App’x 394, 396 (5th Cir. 2011) (per curiam) (unpublished) (“A
district court may consider the five factors, but Hardt does not mandate
consideration.”).
Here, the Appellants advance several arguments against the district
court’s award of attorneys’ fees to LifeCare. The Appellants observe that the
district court did not discuss the Bowen factors. As the Supreme Court made
clear in Hardt, however, the Bowen factors are discretionary. See 30 S. Ct. at
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2158. More fundamentally, the Appellants argue that the district court erred by
awarding excessive attorneys’ fees. Specifically, Appellants contend that this
court should reduce LifeCare’s $453,000 attorneys’ fees award by $150,000
because the district court awarded $80,000 in fees for work on dismissed state
law claims, $50,000 in fees for the allegedly generic time entries, and $20,000 in
fees for pre-suit attorneys’ fees.
The award of $80,000 in fees for work on dismissed state law claims was
not an abuse of discretion because LifeCare achieved “some degree of success on
the merits” in the overall litigation.11 Hardt, 130 S. Ct. at 2151. Further, after
a careful review of the record, the district judge reduced the requested award by
$30,000 for LifeCare’s work on the state law claims. The award of $50,000 in
fees for generic time entries was not an abuse of discretion because LifeCare
provided extensive billing entries that included a description of each entry, and
the time spent on each task. Likewise, the award of $20,000 in fees for pre-suit
work was not an abuse of discretion because the Appellants have failed to show
that the fees were not for work in preparation for this lawsuit.12
Additionally, the Appellants argue that the district court erred by
awarding $65,000 in conditional appellate attorneys’ fees to LifeCare because
11
Appellants rely on Life Partners, Inc. v. Life Insurance Co. of North America, 203 F.3d
324 (5th Cir. 1999) (per curiam), for the proposition that a party cannot recover fees for work
on unsuccessful ERISA pre-empted claims. In Life Partners, this court rejected an award of
attorneys’ fees for work completed by a party on state law claims before the party amended
its complaint to include the ERISA claims on which it prevailed. See 203 F.3d at 326. Life
Partners is distinguishable because LifeCare alleged both the state and ERISA claims at the
start of this lawsuit, and because this court decided Life Partners prior to the Supreme Court’s
Hardt decision.
12
The cases relied on by Appellants—see, e.g., Cann v. Carpenters’ Pension Trust Fund
for N. Cal., 989 F.2d 313, 316 (9th Cir. 1993); Anderson v. Procter & Gamble Co., 220 F.3d 449,
456 (6th Cir. 2000); Hahnemann Univ. Hosp. v. All Shore, Inc., 514 F.3d 300, 313 (3d Cir.
2008)—make clear the pre-suit fees are recoverable so long as the fees are for work in
preparation for litigation and not for pre-trial administrative proceedings.
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there was “no evidence submitted” to support such fees.13 However, the award
of conditional fees was not an abuse of discretion because LifeCare produced
evidence in the form of a detailed affidavit by LifeCare’s counsel explaining why
the fees were necessary.14
6. Conclusion
Accordingly, we AFFIRM the district court’s judgment and award of
attorneys’ fees.
13
The district court awarded $30,000 in attorneys’ fees for LifeCare in the event
Appellants appealed to this circuit, and another $35,000 in fees in the event Appellants
appealed to the Supreme Court.
14
Further, when the district judge stated, “I assume you're not pursuing you position
about the [conditional fees], because I thought those figures were pretty modest[,]” IMA’s
counsel replied, “[y]es, your Honor.”
17