12‐2996‐cv (L)
Donachie v. Liberty Mutual Ins. Co. et al.
In the
United States Court of Appeals
For the Second Circuit
________
AUGUST TERM 2013
Nos. 12‐2996‐cv (Lead), 12‐3031 (XAP)
JOHN J. DONACHIE,
Plaintiff‐AppelleeCross‐Appellant,
v.
LIBERTY LIFE ASSURANCE COMPANY OF BOSTON,
Defendant‐AppellantCross‐Appellee,
LIBERTY MUTUAL INSURANCE COMPANY, LIBERTY MUTUAL
HOLDING COMPANY, INC.,
Defendants.*
________
Appeal from the United States District Court
for the Eastern District of New York.
No. 4 CV 2857 (RRM) ― Roslynn R. Mauskopf, Judge.
________
ARGUED: JANUARY 29, 2014
DECIDED: MARCH 11, 2014
________
* The Clerk of Court is directed to amend the caption to conform to the listing of
the parties shown above.
2 Nos. 12‐2996‐cv (L), 12‐3031‐cv (XAP)
Before: CABRANES, CARNEY, and DRONEY, Circuit Judges.
________
In this appeal, we write primarily to clarify the scope of a
district court’s discretion in deciding whether to award attorneys’
fees to a prevailing plaintiff under the Employee Retirement Income
Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1001 et seq., and the
proper standard to be applied in exercising that discretion. We
consider whether the United States District Court for the Eastern
District of New York (Roslynn R. Mauskopf, Judge) (1) erred by sua
sponte entering summary judgment for plaintiff on his claim for long
term disability benefits pursuant to ERISA; or (2) “abused its
discretion” by denying prevailing plaintiff’s request for attorneys’
fees, based on the conclusion that defendant did not act in bad faith.
We conclude that the District Court properly entered
summary judgment for plaintiff on his claim for disability benefits,
but that it erred in denying his request for attorneys’ fees, inasmuch
as it failed to identify a “particular justification” for not awarding
such fees. Accordingly, we AFFIRM the judgment of the District
Court insofar as it entered summary judgment for plaintiff on his
claim for long term disability benefits, VACATE the judgment
insofar as it denied plaintiff’s request for attorneys’ fees, and
REMAND the cause with instructions that the District Court award
plaintiff reasonable attorneys’ fees, to be determined on remand.
________
MICHAEL F. MONGELLI II, Michael F. Mongelli II,
P.C., Flushing, NY, for Plaintiff.
3 Nos. 12‐2996‐cv (L), 12‐3031‐cv (XAP)
MICHAEL J. ZARETSKY, Chorpenning, Good, Carlet
& Garrison, New York, NY, for Defendant.
________
JOSÉ A. CABRANES, Circuit Judge:
In this appeal, we write primarily to clarify the scope of a
district court’s discretion in deciding whether to award attorneys’
fees to a prevailing plaintiff under the Employee Retirement Income
Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1001 et seq., and the
proper standard to be applied in exercising that discretion. We
consider whether the United States District Court for the Eastern
District of New York (Roslynn R. Mauskopf, Judge) (1) erred by sua
sponte entering summary judgment for plaintiff on his claim for long
term disability benefits pursuant to ERISA; or (2) “abused its
discretion” by denying prevailing plaintiff’s request for attorneys’
fees, based on the conclusion that defendant did not act in bad faith.
We conclude that the District Court properly entered
summary judgment for plaintiff on his claim for disability benefits,
but that it erred in denying his request for attorneys’ fees, inasmuch
as it failed to identify a “particular justification” for not awarding
such fees. Accordingly, we AFFIRM the judgment of the District
Court insofar as it entered summary judgment for plaintiff on his
claim for long term disability benefits, VACATE the judgment
insofar as it denied plaintiff’s request for attorneys’ fees, and
REMAND the cause with instructions that the District Court award
plaintiff reasonable attorneys’ fees, to be determined on remand.
4 Nos. 12‐2996‐cv (L), 12‐3031‐cv (XAP)
BACKGROUND
In December 2001, while employed at FleetBoston Financial
Corporation (“Fleet”), plaintiff John J. Donachie (“Donachie”)
underwent surgery to replace his aortic valve. An unanticipated side
effect of the surgery was that he could feel and hear the
compressions of the prosthetic valve with each beat of his heart.
Indeed, the sounds were audible to persons sitting in the same room
with Donachie.
Donachie’s treating cardiologist, Stephen J. Gulotta, M.D.
(“Dr. Gulotta”), opined that the surgery had been a success, but that
the noise from the prosthetic valve caused Donachie “a great deal of
anxiety,” resulting in physical and mental exhaustion from lack of
sleep, and rendering him unable to perform his current job.
Donachie’s treating psychiatrist, Robert Gordon, M.D. (“Dr.
Gordon”), whom he saw in connection with the side effects of the
valve replacement, stated that the audible clicking added
significantly to the anxiety Donachie experienced in his employment
and ultimately diagnosed Donachie with ”major depression.”
On June 19, 2003, after attempting to return to his regular
work schedule, Donachie submitted a claim for disability benefits to
Liberty Life Assurance Company of Boston (“Liberty”)
―administrator of Fleet’s long‐term disability (“LTD”) plan.1 In
1 In July 2003, Liberty approved Donachie’s request for short‐term disability
benefits, which were administered by Liberty but paid by Fleet. Donachie continued to
receive these benefits until at least December 2003, when his claim for long‐term
disability benefits was denied.
5 Nos. 12‐2996‐cv (L), 12‐3031‐cv (XAP)
evaluating Donachie’s claim for LTD benefits, Liberty requested
medical records and information about Donachie’s physical
condition, and arranged for an independent medical examination by
cardiologist George Brief, M.D. (“Dr. Brief”). Dr. Brief concluded
that, from a cardiology standpoint, the valve replacement had been a
success, and that, physically, Donachie could return to work. He
noted, however, that Donachie’s present complaints “should be
evaluated by an expert in the field of psychology.” Upon review of
Dr. Brief’s report, Dr. Gulotta clarified that the source of Donachie’s
current disability was not primarily physical, and that Donachie was
”psychologically crippled.” Dr. Gulotta echoed Dr. Brief’s
recommendation that Donachie be evaluated by one of Liberty’s
psychologists or psychiatrists.
In response to these recommendations, Liberty engaged its
own consulting psychiatrist, Andrew O. Brown, M.D. (“Dr.
Brown”), to review Donachie’s claim. Dr. Brown reviewed
Donachie’s medical file and Dr. Gordon’s records, but he never
spoke directly with either individual. On December 22, 2003, on the
basis of Dr. Brown’s recommendation, Liberty denied Donachie’s
claim for LTD benefits.
After exhausting the internal appeals process, Donachie
appealed the denial of his claim for LTD benefits to the District
Court in a Complaint filed on July 8, 2004. Liberty moved for
summary judgment. In a March 10, 2009 Report and
Recommendation (“R&R”), Magistrate Judge Arlene Rosario
Lindsay recommended denying Liberty’s motion, and granting
6 Nos. 12‐2996‐cv (L), 12‐3031‐cv (XAP)
summary judgment sua sponte for Donachie on his request for LTD
benefits. On June 27, 2012, approximately nine years after Donachie
first requested benefits, the District Court adopted the R&R, and
entered summary judgment for Donachie,2 but denied Donachie’s
request for attorneys’ fees. This timely appeal followed.
DISCUSSION
A. Denial of LTD Benefits
Judge Mauskopf reviewed the R&R de novo and adopted its
disposition, denying Liberty’s motion for summary judgment and
sua sponte granting summary judgment for Donachie,3 on the basis
that the denial of LTD benefits had been arbitrary and capricious.4
We review the District Court’s order entering summary judgment de
novo. Pagan v. NYNEX Pension Plan, 52 F.3d 438, 441 (2d Cir. 1995); cf.
Celardo v. GNY Auto. Dealers Health & Welfare Trust, 318 F.3d 142, 145
(2d Cir. 2003) (“[D]etermination that the Trustees’ decision was
2 The District Court awarded plaintiff “own occupation” LTD benefits, but held
that “it would be premature to grant plaintiff the ‘any occupation’ benefits,” and
remanded to Liberty to determine eligibility for these additional benefits. The parties do
not address on appeal the additional LTD benefits requested.
3 A sua sponte grant of summary judgment against the moving party is
permissible only if “the facts before the district court were fully developed so that the
moving party suffered no procedural prejudice” and “[the] court is absolutely sure that
no issue of material fact exists.” Bridgeway Corp. v. Citibank, 201 F.3d 134, 139 (2d Cir.
2000) (internal quotation marks omitted). Liberty does not contend that it was denied the
opportunity to place all relevant evidence in the record. Accordingly, the District Court’s
grant of summary judgment was not procedurally deficient.
4 In an ERISA action, the discretionary decision by an ERISA‐plan administrator
to deny benefits is subject to arbitrary and capricious review. Durakovic v. Bldg. Serv. 32 BJ
Pension Fund, 609 F.3d 133, 137 (2d Cir. 2010).
7 Nos. 12‐2996‐cv (L), 12‐3031‐cv (XAP)
arbitrary and capricious is a legal conclusion, . . . review[ed] . . . de
novo.”).
Upon review of the record, we conclude that Liberty’s denial
of LTD benefits was indeed arbitrary and capricious, substantially
for the reasons stated in the R&R and in the District Court’s
opinion―namely, that Liberty ignored substantial evidence from
Donachie’s treating physicians that he was incapable of performing
his current occupation, while failing to offer any reliable evidence to
the contrary.5 See Black & Decker Disability Plan v. Nord, 538 U.S. 822,
834 (2003) (holding that plan administrators may “credit reliable
evidence that conflicts with a treating physician’s evaluation,” but
“may not arbitrarily refuse to credit a claimant’s reliable evidence,
including the opinions of a treating physician.”). Accordingly, we
affirm the District Court’s judgment insofar as it entered summary
judgment for Donachie on his ERISA claim for LTD benefits.
B. Denial of Attorneys’ Fees
The District Court awarded Donachie prejudgment interest,
but denied his request for attorneys’ fees on the basis that he had
“failed to show any bad faith by Liberty’s administrator in making
its LTD benefits determination.” Donachie v. Liberty Life Assurance Co.
“Liberty failed to order anything more than a consultative review [by an in‐
5
house psychiatrist] of plaintiff’s records, despite the advice of . . . plaintiff’s treating
cardiologist, and . . . the independent medical examiner,” that Donachie be evaluated by
an expert in psychology. Special App’x 3‐4. The in‐house psychiatrist never met with
Donachie or his treating psychiatrist or social worker.
8 Nos. 12‐2996‐cv (L), 12‐3031‐cv (XAP)
of Boston, No. 4 cv 2857 (RRM) (ARL), 2012 WL 2394829, at *4
(E.D.N.Y. June 25, 2012).
We review a district court’s denial of an application for
attorneys’ fees under ERISA for “abuse of discretion.” Slupinski v.
First Unum Life Ins. Co., 554 F.3d 38, 47 (2d Cir. 2009). A court abuses
its discretion when its decision “[(1)] rests on an error of law . . . or a
clearly erroneous factual finding, or (2) . . . [otherwise] cannot be
located within the range of permissible decisions.” Id. (internal
quotation marks omitted).
ERISA’s fee shifting statute provides that “the court in its
discretion may allow a reasonable attorney’s fee and costs . . . to
either party.” 29 U.S.C. § 1132(g)(1). It is well‐established that
“Congress intended the fee provisions of ERISA to encourage
beneficiaries to enforce their statutory rights.” Slupinski, 554 F.3d at
47; see also Locher v. Unum Life Ins. Co. of Am., 389 F.3d 288, 298 (2d
Cir. 2004) (“‘ERISA’s attorney’s fee provisions must be liberally
construed to protect the statutory purpose of vindicating retirement
rights.” (quoting Chambless v. Masters, Mates & Pilots Pension
Plan, 815 F.2d 869, 872 (2d Cir. 1987)).
The Supreme Court has nonetheless cautioned that a district
court’s discretion to award attorneys’ fees under ERISA “is not
unlimited,” inasmuch as it may only award attorneys’ fees to a
beneficiary who has obtained “some degree of success on the
merits.” Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242, 254‐55
(2010) (“[T]he proper marker[ ] to guide a court in exercising the
9 Nos. 12‐2996‐cv (L), 12‐3031‐cv (XAP)
discretion that § 1132(g)(1) grants” is whether “a fees claimant [has]
show[n] ‘some degree of success on the merits’” (quoting Ruckelshaus
v. Sierra Club, 463 U.S. 680, 694 (1983)) (other quotation marks
omitted).
After Hardt, whether a plaintiff has obtained some degree of
success on the merits is the sole factor that a court must consider in
exercising its discretion. See id. at 255 (the traditional five‐factor test
is “not required for channeling a court’s discretion when awarding
fees under [§ 1132(g)(1)]”). Although a court may, without further
inquiry, award attorneys’ fees to a plaintiff who has had “some
degree of success on the merits,” Hardt also made clear that courts
retain discretion to “consider[ ] five [additional] factors . . . in
deciding whether to award attorney’s fees.” Id. at 255 n.8; accord
Scarangella v. Grp. Health, Inc., 731 F.3d 146, 152 (2d Cir. 2013) (“Hardt
also permitted the use of the five‐factor tests adopted by most
Circuit[s] . . . to channel discretion in awarding reasonable fees to
eligible parties, but held that courts were not required to use
them.”). Those five factors, known in this Circuit as the “Chambless
factors” are:
(1) the degree of opposing parties’ culpability or bad
faith; (2) ability of opposing parties to satisfy an award
of attorneys’ fees; (3) whether an award of attorneys’
fees against the opposing parties would deter other
persons acting under similar circumstances; (4) whether
the parties requesting attorneys’ fees sought to benefit
all participants and beneficiaries of an ERISA plan or to
10 Nos. 12‐2996‐cv (L), 12‐3031‐cv (XAP)
resolve a significant legal question regarding ERISA
itself; and (5) the relative merits of the parties’ positions.
Hardt, 560 U.S. at 249 n.1 (internal quotation marks omitted); see also
Chambless, 815 F.2d at 871 (identifying same five factors).6
Hardt does not, in our view, give district courts choosing to
look beyond “success on the merits” unbridled discretion in
considering whether to award fees to a successful party. Rather, it
says that courts, under those circumstances, may apply the
Chambless framework, or its equivalent in other circuits. Accord
Toussaint v. JJ Weiser, Inc., 648 F.3d 108, 110 (2d Cir. 2011) (“A court
may apply—but is not required to apply—the Chambless factors in
‘channeling [its] discretion when awarding fees’ under § 1132(g)(1).
So long as a party has achieved ‘some degree of success on the
merits,’ a court in its discretion may allow a reasonable attorneyʹs
fee. . . .”) (quoting Hardt, other quotation marks omitted).
In other words, if a court chooses to consider factors other
than a plaintiff’s “success on the merits” in assessing a request for
attorneys’ fees, Chambless still provides the relevant framework in
this Circuit, and courts must deploy that useful framework in a
manner consistent with our case law. A court cannot selectively
consider some factors while ignoring others.
6 Because Hardt was an appeal from a Fourth Circuit case, the Supreme Court
invoked the Fourth Circuit’s incarnation of the five‐factor test, which is substantively the
same as the Chambless test.
11 Nos. 12‐2996‐cv (L), 12‐3031‐cv (XAP)
In this case, there is no question that Donachie, as the
prevailing party, was eligible for an award of attorneys’ fees.
Indeed, in light of the ERISA fee provision’s “statutory purpose of
vindicating retirement rights,” Locher, 389 F.3d at 298, granting a
prevailing plaintiff’s request for fees is appropriate absent “some
particular justification for not doing so.” Birmingham v. SoGen‐Swiss
Int’l Corp. Ret. Plan, 718 F.2d 515, 523 (2d Cir. 1983).
Although the District Court had discretion to consider
whether the Chambless factors provided a particular justification for
denying Donachie attorneys’ fees, it misapplied that framework. It
originally denied attorneys’ fees on the sole basis that Liberty had
not acted in bad faith. But we have explained that “a party need not
prove that the offending party acted in bad faith” in order to be
entitled to attorneys’ fees. See Slupinski, 554 F.3d at 48. Moreover, the
concepts of “bad faith” and “culpability” are distinct, and either one
may satisfy the first Chambless factor. See id. The District Court did
not consider culpability, which we have found in circumstances
analogous to those at issue here. See, e.g., Locher, 389 F.3d at 298‐99
(finding that although ERISA administrator did not act in bad faith,
it was “culpable” because, inter alia, on‐site physicians summarily
rejected proffered medical evaluations and applied general
assumptions about human behavior).
The District Court also did not address the “relative merits,”
which, in view of its decision to grant summary judgment sua sponte,
favor Donachie. We have explained that “while the degree of
culpability and the relative merits ‘are not dispositive under the
12 Nos. 12‐2996‐cv (L), 12‐3031‐cv (XAP)
Chambless five‐factor test,’ they do ‘weigh heavily.’” Slupinski, 554
F.3d at 48 (quoting Anita Founds., Inc. v. ILGWU Nat’l Ret. Fund, 902
F.2d 185, 189 (2d Cir. 1990) (alterations omitted)). By inadequately
addressing these two important factors and, instead, treating the
absence of bad faith as the most salient factor, the District Court
committed an error of law, and, therefore, “abused its discretion.”
Our own review of the record reveals no “particular
justification” for denying Donachie’s request for attorneys’ fees, and
we are persuaded that awarding attorneys’ fees in the circumstances
presented furthers the policy interest in vindicating the rights
secured by ERISA. Accordingly, we vacate the judgment insofar as it
denied Donachie an award of attorneys’ fees, and remand the cause
to the District Court with directions to award Donachie reasonable
attorneys’ fees to be calculated on remand.
CONCLUSION
To summarize:
(1) The District Court did not err in sua sponte entering
summary judgment for Donachie on his claim for LTD
benefits.
(2) Courts retain discretion to consider the Chambless factors,
in determining whether to grant an eligible plaintiff’s
request for attorneys’ fees, but must do so in a manner
consistent with our case law, and cannot selectively
consider some factors while ignoring others.
13 Nos. 12‐2996‐cv (L), 12‐3031‐cv (XAP)
(3) The District Court misapplied the Chambless framework,
and therefore erred, in denying fees to a prevailing plaintiff
based primarily on the conclusion that Liberty had not
acted in bad faith.
(4) The record reveals no particular justification for denying
Donachie attorneys’ fees, and awarding fees in the
circumstances presented here furthers the policy interest in
vindicating the rights secured by ERISA.
For the reasons set forth above, the judgment is AFFIRMED
insofar as the District Court granted summary judgment for
Donachie on his claim for LTD benefits, VACATED insofar as the
District Court denied Donachie’s request for attorneys’ fees, and the
cause is REMANDED with instructions that the District Court
award plaintiff reasonable attorneys’ fees to be calculated on
remand.
Donachie v. Liberty Mutual Ins. Co.
Combined Opinion