John J. Donachie v. Liberty Life Assurance Company of Boston

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.

5 "Liberty failed to order anything more than a consultative review [by an inhouse

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.



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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



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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.

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.