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Van Loo v. Cajun Operating Co.

United States District Court, E.D. Michigan, Southern Division

October 25, 2016

DONALD AND HARRIET VAN LOO, Plaintiffs,
v.
CAJUN OPERATING COMPANY d/b/a CHURCH'S CHICKEN, a Delaware Corporation, Defendant.

          David R. Grand Magistrate Judge.

          OPINION AND ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFFS' MOTION FOR ATTORNEYS' FEES AND COSTS [113]

          LAURIE J. MICHELSON U.S. DISTRICT JUDGE

         Donna Van Loo, the daughter of Plaintiffs Donald and Harriet Van Loo, was employed by Defendant Cajun Operating Company d/b/a/ Church's Chicken (“Church's”). Donna purchased life insurance through a policy that Church's purchased through Reliance Standard Life Insurance Company, naming Plaintiffs as her beneficiaries. Donna passed away in 2012, having increased her level of coverage over the preceding four years. When Plaintiffs attempted to collect the benefits they believed they were owed under the Policy, Reliance denied the claim based on Donna's failure to submit an evidence of insurability form (“EIF”). Plaintiffs sued both Church's and Reliance, asserting that Donna had been misled regarding the EIF requirement. Ultimately, the Court dismissed Plaintiffs' claims against Reliance, but granted summary judgment to Plaintiffs on their claim that Church's breached a fiduciary duty to Donna by failing to inform her that an EIF would be required for the level of coverage she had selected. Plaintiffs now seek to recover $166, 872.50 in attorney's fees from Church's. The motion will be granted in part and denied in part.

         I. DISCUSSION

         Plaintiffs brought their case pursuant to the Employee Retirement Income Security Act of 1974 (“ERISA”). ERISA § 502(g)(1) provides that “[i]n an action under this title . . . 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). As the Supreme Court has held, “[A] fees claimant must show some degree of success on the merits before a court may award attorney's fees under § 1132(g)(1).” Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242, 255 (2010) (internal quotation marks and citations omitted). Because the Court has found that Church's breached a fiduciary duty when they led Donna Van Loo to believe she qualified for life insurance coverage in excess of $300, 000, Plaintiffs have achieved “some degree of success on the merits.”

         But the Court must also examine additional factors to determine whether a fee award is appropriate:

(1) the degree of the opposing party's culpability or bad faith; (2) the opposing party's ability to satisfy an award of attorney's fees; (3) the deterrent effect of an award on other persons under similar circumstances; (4) whether the party requesting fees sought to confer a common benefit on all participants and beneficiaries of an ERISA plan or resolve significant legal questions regarding ERISA; and (5) the relative merits of the parties' positions.

Shelby Cty. Health Care Corp. v. Majestic Star Casino, 581 F.3d 355, 376 (6th Cir. 2009) (citation omitted); see also Sec'y of Dep't of Labor v. King, 775 F.2d 666, 669 (6th Cir.1985) (creating the five-factor test). “No single factor is determinative.” Moon v. Unum Provident Corp., 461 F.3d 639, 642-43 (6th Cir. 2006) (per curiam).

         The culpability or bad faith factor weighs slightly in favor of a fee award. The Court previously held that plan administrator Church's breached a fiduciary duty by failing to inform Donna Van Loo of the EIF requirement in 2008, when she was entitled to be evaluated. Van Loo v. Cajun Operating Co., ___ F.Supp.3d ___, No. 14-CV-10604, 2016 WL 3137822, at *11 (E.D. Mich. June 6, 2016). “Defendants may be culpable without evincing bad faith.” Huizinga v. Genzink Steel Supply & Welding Co., 984 F.Supp.2d 741, 749 (W.D. Mich. 2013). On the one hand, there was evidence in the record that Church's believed that its interpretation of the policy was correct and that in 2010, Church's asked Reliance to send an EIF to Donna Van Loo. Therefore, the Court does not find that Church's conduct amounted to bad faith. On the other hand, the conduct was still “blameworthy” given that Church's communications with Van Loo would lead “a reasonable person [to] assume that an EIF would be provided if needed, ” yet Van Loo was not provided an EIF at the appropriate time. Van Loo, 2016 WL 3137822, at *10.

         As to the second factor, Church's ability to satisfy a fee award is not disputed and so this factor also weighs in favor of a fee award. (R. 113, PID 2835; R. 118, PID 3056).

         Deterrence also weighs in favor of a fee award. The Sixth Circuit has observed that “fee awards are likely to have the greatest deterrent effect where deliberate misconduct is in the offing.” Foltice v. Guardsman Products, Inc., 98 F.3d 933, 937 (6th Cir. 1996). While the Court has made no finding that Church's deliberately misled Van Loo, the Court finds that an award of fees would still have some deterrence value. Employers who act as plan administrators should be aware of their duty to communicate to their employees the Plan requirements that arise in connection with certain benefits elections. This is especially so where a separate party acts as the claims administrator. In this case, for example, Reliance was within its rights to deny Plaintiffs' claims for benefits in excess of $300, 000 because there was no EIF on file-and because the Court's review of that decision was limited to the administrative record, Plaintiffs were unable to fully develop their argument that Van Loo had been misled regarding the EIF requirement. Van Loo v. Cajun Operating Co., No. 14-CV-10604, 2015 WL 7889034, at *11 (E.D. Mich. Dec. 4, 2015). While it may be true that, as Church's argues, the fiduciary duties of an employer-plan sponsor are “well-established under the law, ” this case demonstrates that employers should ensure accurate knowledge of a policy's requirements before communicating with employees regarding coverage.

         By bringing this case, Plaintiffs did confer a benefit on Donna Van Loo's fellow plan participants, and even if that was not their intention, this case did resolve significant legal questions regarding ERISA. This litigation clarified that Church's did have an obligation to disclose to plan participants the existence of the EIF requirement. Discovery in this case revealed that Donna Van Loo was not the only employee for whom an EIF was missing. Van Loo v. Cajun Operating Co., ___ F.Supp.3d ___, No. 14-CV-10604, 2016 WL 3137822, at *3 (E.D. Mich. June 6, 2016). Presumably, Church's has taken the opportunity to complete the files for these employees, avoiding possible recurrence of the issue that gave rise to this case. Moreover, this case gave the Court the opportunity to clarify issues regarding fiduciary status and appropriate relief for fiduciary-breach actions under ERISA in this circuit. See Van Loo v. Cajun Operating Co., 64 F.Supp.3d 1007, 1026 (E.D. Mich. 2014). Therefore, this factor weighs in favor of a fee award.

         Finally, while Plaintiffs ultimately prevailed on summary judgment as to the fiduciary-breach claim, Church's asserted meritorious arguments as to the other claims in this lawsuit. Plaintiffs originally asserted five counts against Church's. All of the counts stemmed from the same set of facts: Church's failure to provide the EIF and Reliance's denial of benefits based on the lack of EIF. Plaintiffs' ultimately prevailed on their breach-of-fiduciary duty claim, Van Loo, 2016 WL 3137822, at *11, but it is worth noting that all four of their other claims were dismissed as a matter of law before discovery, based on arguments that Church's made. Van Loo, 64 F.Supp.3d at 1032. Therefore, this factor is neutral.

         The Court finds that overall the relevant factors weigh in favor of an award of attorney's fees. Plaintiffs successfully litigated a fiduciary-breach claim against Church's for conduct that was at least culpable, and in doing so, created deterrent value and a benefit to other plan ...


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