[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
_______________________
FILED
No. 08-15022 U.S. COURT OF APPEALS
________________________ ELEVENTH CIRCUIT
MARCH 30, 2009
THOMAS K. KAHN
D.C. Docket No. 05-60101-CV-FAM CLERK
LISA KAHANE,
Plaintiff-Appellant,
versus
UNUM LIFE INSURANCE COMPANY OF AMERICA,
Defendant-Appellee.
________________________
Appeal from the United States District Court
for the Southern District of Florida
________________________
(March 30, 2009)
Before TJOFLAT, BLACK, and COX, Circuit Judges.
COX, Circuit Judge:
In this appeal, we consider whether a Plaintiff who agreed to stay litigation
brought pursuant to the Employee Retirement and Income Security Act (ERISA), 29
U.S.C. § 1132(a)(1)(B), and participate in a voluntary claim reassessment process
with a Defendant insurer, is entitled to recover attorney’s fees for work done in that
process. We conclude that the claim reassessment process at issue in this appeal is
substantially similar to the pre-litigation administrative proceedings required by
ERISA. Because we conclude that attorney’s fees and costs are not recoverable for
pre-litigation administrative procedures under 29 U.S.C. § 1132(g)(1), they are not
available for this claim reassessment process. We also conclude that the district court
did not abuse its discretion in limiting the amount of the Plaintiff’s recovery of
attorney’s fees and costs for preparation of the motion for fees and costs.
I. FACTUAL AND PROCEDURAL BACKGROUND
In response to Plaintiff Lisa Kahane’s claim for disability benefits under a long
term disability policy issued by UNUM Life Insurance Company of America
(“UNUM”), UNUM determined that Kahane was disabled, but that benefits due her
under the policy were limited to twenty-four months of payments because her
disability was based on self-reported symptoms or a mental or nervous condition.
Kahane appealed UNUM’s determination through UNUM’s internal appeals process.
In response to Kahane’s appeal, UNUM adhered to its original decision.
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Kahane filed a complaint in district court against UNUM pursuant to ERISA,
29 U.S.C. § 1132(a)(1)(B). Kahane alleged that UNUM had wrongfully limited the
term of disability benefits to which she was due. The complaint contained a claim for
attorney’s fees and costs as authorized by ERISA, 29 U.S.C. § 1132(g)(1).
Before Kahane sued UNUM, UNUM and several other disability insurance
companies entered into a settlement agreement with the U.S. Department of Labor
and the insurance regulators of forty-nine states. As a part of that settlement
agreement, UNUM was required to offer claimants like Kahane the opportunity to
have their claims revisited through a claim reassessment process. In that process, the
insurer would conduct a review of the original claim and any additional information
provided to the insurer by the claimant to determine whether the original claim
decision was proper.
Shortly after Kahane filed her complaint, she received a letter from UNUM
offering her the option of pursuing her claim through the claim reassessment process.
That letter stated:
You are under no obligation to participate in the
Claim Reassessment process. . . .
If you have already commenced legal action relating
to your prior claim(s) decision, please provide a copy of
this letter to your attorney as soon as possible so that he or
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she might advise you concerning the alternatives. If, after
consulting with your attorney, you decide to participate in
the reassessment, you will need to agree to take such action
as is necessary to seek to stay such litigation pending the
outcome of the reassessment process. . . . As to any portion
of a prior [claim] denial that is reversed or changed and
you have agreed to withdraw the action as described above,
the Company will attempt to reach agreement with you
regarding the payment of any reasonable attorney’s fee to
which you may be entitled under law, and if we are unable
to reach such an agreement, you will not be prejudiced
from pursuing such fees in a court of law.
(R.1-8, Ex. A at 1-2.)
Before UNUM answered the complaint, Kahane agreed to have her claim
revisited in the claim reassessment process. On Kahane’s motion, the district court
stayed the litigation. Kahane’s lawyers represented her in the claim reassessment
process, marshaling facts and legal theories relevant to her claim and communicating
with UNUM on Kahane’s behalf.
As a result of the claim reassessment process, UNUM agreed to reinstate
payment of Kahane’s benefits retroactively. All of Kahane’s claims against UNUM,
with the exception of her claim for attorney’s fees and costs, were resolved. Kahane
voluntarily dismissed all of the resolved claims but moved the district court for an
award of all attorney’s fees and costs she incurred in the matter.
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A magistrate judge considered Kahane’s motion initially. The magistrate judge
recommended that the motion be granted in part and denied in part. The magistrate
judge recommended that Kahane receive fees and costs for the work done in the
litigation (prior to the stay) but found that Kahane should not recover fees and costs
for the work done in the claim reassessment process (during the stay). (R.2-36 at 8-
9.) The magistrate judge also recommended awarding fees and costs for preparation
of the motion seeking fees and costs (after the stay was lifted) but found that the
number of hours expended was unreasonable and therefore recommended limiting the
number of hours for which fees would be awarded. (Id. at 11.) The district court
adopted the magistrate judge’s report and recommendation and entered judgment for
Kahane in the amount of $8,688.50. Kahane appeals.
II. CONTENTIONS OF THE PARTIES
Kahane argues that she is entitled to attorney’s fees and costs for all of her
attorney’s work on the matter, including the work done in the claim reassessment
process and all of the time claimed for preparation of the motion for attorney’s fees
and costs. She argues that the district court erred in holding that ERISA does not
authorize recovery of fees for the claim reassessment process.
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UNUM defends the judgment, arguing that the district court did not abuse its
discretion in limiting the award because fees and costs awarded under ERISA are
limited to those fees and costs incurred in an action before a court, and the claim
reassessment process was not part of such an action. UNUM also argues that the
district court did not abuse its discretion in limiting the fees and costs awarded for
work on the motion for attorney’s fees and costs.
III. ISSUES ON APPEAL
We consider whether the district court abused its discretion by denying
Kahane’s claim for fees and costs incurred during the claim reassessment process or
by limiting the amount of fees and costs awarded for preparation of the motion for
attorney’s fees and costs.
IV. STANDARD OF REVIEW
We review awards of attorney’s fees and costs for abuse of discretion,
revisiting questions of law de novo and reviewing findings of fact for clear error.
Atlanta Journal & Constitution v. City of Atlanta Dep’t of Aviation, 442 F.3d 1283,
1287 (11th Cir. 2006). An error of law is an abuse of discretion. Resnick v. Uccello
Immobilien GMBH, Inc., 227 F.3d 1347, 1350 (11th Cir. 2000).
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V. DISCUSSION
The statutory provision under which Kahane claims entitlement to attorney’s
fees and costs states:
In any action under this subchapter . . . by a participant,
beneficiary, or fiduciary, the court in its discretion may
allow a reasonable attorney’s fee and costs of action to
either party.
29 U.S.C. § 1132(g)(1).
By adopting the magistrate judge’s report and recommendation, the district
court held that Kahane should not recover for fees and costs incurred during the claim
reassessment process because the work done during that process did not further the
ERISA litigation. Kahane argues that, because her attorneys represented her in the
claim reassessment process after she filed an action under ERISA, the statutory
language quoted above authorizes a fee award for work done in that process. She
argues that the term “action” in the statute should be construed broadly to authorize
an award of fees and costs for all work done after an ERISA complaint is filed, even
if that work is not performed in furtherance of traditional litigation.
UNUM responds that at least one other court of appeals has interpreted the
term “action” in the ERISA fee statute to mean litigation before a court only. See
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Cann v. Carpenters’ Pension Trust Fund, 989 F.2d 313, 315-17 (9th Cir. 1993) (“We
construe [§ 1132(g)(1)] as limiting the award to fees incurred in the litigation in
court.”). UNUM urges us to adopt the same reading of the statute.
We are mindful that the Supreme Court has, in other contexts, said that
“[W]here administrative proceedings are intimately tied to the resolution of the
judicial action and necessary to the attainment of the results Congress sought to
promote by providing for fees, they should be considered part and parcel of the action
for which fees may be awarded.” Sullivan v. Hudson, 490 U.S. 877, 888, 109 S. Ct.
2248, 2256 (1989) (considering fee award under the Equal Access to Justice Act, 28
U.S.C. § 2412(d) (1982 ed., Supp. V)). Therefore, we decline UNUM’s invitation
to hold that the term “action” in 29 U.S.C. § 1132(g)(1) must mean only those
proceedings before a court. We save for another day the question of whether
administrative proceedings other than pre-litigation administrative proceedings can
support an award of fees under ERISA.
Nonetheless, for the reasons discussed below, we hold that the claim resolution
process in which Kahane and UNUM engaged is not an administrative proceeding
that should be considered part of the judicial action for which fees may be awarded.
We first examine the nature of the proceeding at issue in this case and conclude that
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it is analogous to a pre-litigation administrative proceeding. And, we conclude that
attorney’s fees incurred in pre-litigation administrative proceedings are not
recoverable under ERISA, 29 U.S.C. § 1132(g)(1).
In this case, the claim reassessment process in which Kahane and UNUM
engaged closely resembles pre-litigation administrative proceedings. While it was
initiated after Kahane’s ERISA complaint was filed, Kahane does not dispute that the
claim reassessment process would have been available to her even if she never filed
a lawsuit. The district court did not remand Kahane’s case for further administrative
action or order the parties to engage in the claim reassessment process as a
prerequisite to the court’s resolution of the lawsuit or entry of judgment. Kahane’s
ERISA lawsuit was stayed voluntarily during the claim reassessment process. Put
plainly, the claim reassessment process was a redo of the first administrative appeal.
It was a reevaluation of Kahane’s claim for benefits, performed by the insurer,
without the involvement of a third-party adjudicator, during a voluntary stay of court
proceedings. Kahane chose to be represented by counsel, but counsel was not
required.
We are mindful that pre-litigation administrative proceedings are an important
prerequisite to lawsuits brought under ERISA. “It is well-established law . . . that
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plaintiffs in ERISA cases must . . . exhaust available administrative remedies under
their ERISA-governed plans before they may bring suit in federal court.” Springer
v. Wal-Mart Assocs.’ Group Health Plan, 908 F.2d 897, 899 (11th Cir. 1990). In the
case of insurance claims, exhaustion of administrative remedies often involves an
appeal of a claim denial to the insurer. The parties to this appeal do not dispute that
Kahane satisfied ERISA’s administrative exhaustion requirement when, prior to filing
her ERISA complaint, she unsuccessfully appealed to UNUM regarding its decision
to place a time limit on the benefits paid her.
This court has not decided previously the question of whether ERISA provides
for an award of attorney’s fees and costs incurred in pre-litigation administrative
proceedings. However, six other circuit courts of appeals have considered the
question. All six have determined that, as a matter of law, ERISA does not provide
for such an award. See Hahnemann Univ. Hosp. v. All Shore, Inc., 514 F.3d 300, 313
(3d Cir. 2008) (“[T]he fees incurred during administrative proceedings prior to filing
suit are unavailable under 29 U.S.C. § 1132(g)(1).”); Parke v. First Reliance
Standard Life Ins. Co., 368 F.3d 999, 1011 (8th Cir. 2004) (“[T]he term ‘any action’
in 29 U.S.C. § 1132(g)(1) does not extend to pre-litigation administrative
proceedings.”); Rego v. Westvaco Corp., 319 F.3d 140, 150 (4th Cir. 2003) (“[H]ere
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we agree with our sister circuits that have held ERISA attorney’s fees to be
categorically unavailable for expenses incurred while exhausting administrative
remedies.”); Peterson v. Cont’l Cas. Co., 282 F.3d 112, 121 (2d Cir. 2002) (“ERISA
authorizes the award only for fees incurred in relation to a suit filed in a court of
competent jurisdiction. Therefore, [the Plaintiff] may not collect fees incurred during
the initial administrative process.”); Anderson v. Procter & Gamble Co., 220 F.3d
449, 455 (6th Cir. 2000) (“[Section] 1132(g)(1) should not be interpreted to permit
fee awards for legal expenses incurred in the course of exhausting administrative
remedies.”); Cann, 989 F.2d at 316 (“We construe [§ 1132(g)(1)] as limiting the
award to fees incurred in the litigation in court.”).
We join these other circuits in holding that § 1132(g)(1) does not authorize
awards for work done in pre-litigation administrative proceedings. We do so for the
reason stated by the Fourth Circuit, namely, by requiring the exhaustion of
administrative remedies, it was Congress’s “‘desire not to create a system that is so
complex that administrative costs, or litigation expenses, unduly discourage
employers from offering welfare benefits plans in the first place.’” Rego, 319 F.3d
at 150 (quoting Varity Corp. v. Howe, 516 U.S. 489, 497, 116 S. Ct. 1065, 1070
(1996)). To provide for fee awards in pre-litigation administrative proceedings
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would inject attorneys into those proceedings as a matter of course and “could
severely undermine the congressional purpose . . . .” Id. It is for that reason that we
conclude, as have the Sixth and Eighth circuits, that ERISA pre-litigation
administrative proceedings are not administrative proceedings “so intimately
connected with judicial proceedings as to be considered part of the ‘civil action’ for
purposes of a fee award.” Sullivan, 490 U.S. at 892, 109 S. Ct. at 2258. See Parke,
368 F.3d at 1011; Anderson, 220 F.3d at 453-54.
The claim reassessment process at issue in this appeal is not significantly
different than the pre-litigation administrative procedures required by ERISA.
Because attorney’s fees and costs are not available for those pre-litigation
administrative proceedings, the district court properly held that attorney’s fees and
costs are not available to Kahane for work done during the claim reassessment
process.
Considering Kahane’s other argument on appeal, we find no abuse of discretion
in the district court’s limitation of the award of attorney’s fees and costs associated
with preparation of the motion for fees and costs. In adopting the magistrate judge’s
report and recommendation, the district court awarded fees for all of the 5.25 hours
of attorney work done in the litigation, aside from the work on the fee application.
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(R.2-36 at 11.) As discussed above, we find no error in that award. Kahane’s motion
sought fees for an additional 26.25 hours of work on the fee application alone. (Id.)
We are cognizant, as were the magistrate judge and district court, that “[a] request for
attorney’s fees should not result in a second major litigation.” Hensley v. Eckerhart,
461 U.S. 424, 437, 103 S. Ct. 1933, 1941 (1983). Given the disparity between the
time spent on litigation other than the fee application and the time spent seeking fees
and costs, we find no abuse of discretion in the district court’s determination that an
award of all of the fees and costs sought for preparation of the motion would be
unreasonable and that an award of fees for 13.5 hours of work done on the motion is
adequate.
VI. CONCLUSION
We hold that the claim reassessment process at issue in this appeal is
substantially similar to the pre-litigation administrative procedures required by
ERISA. We also hold that attorney’s fees and costs for pre-litigation administrative
procedures are not recoverable under 29 U.S.C. § 1132(g)(1) and thus are also not
recoverable for the claim reassessment process. The district court’s judgment is
affirmed.
AFFIRMED.
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