Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca6-08-04739/USCOURTS-ca6-08-04739-0/pdf.json

Parties Involved:
Sonya L. Hall
Appellant Cross-Appellee
Liberty Life Assurance Company of Boston

National City Corporation Welfare Benefits Plan
Appellee Cross-Appellant

Document Text:

RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit Rule 206

File Name: 10a0028p.06

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT _________________

SONYA L. HALL,

Plaintiff-Appellant/Cross-Appellee,

v.

LIBERTY LIFE ASSURANCE COMPANY OF

BOSTON,

Defendant,

NATIONAL CITY CORPORATION WELFARE

BENEFITS PLAN,

Defendant-Appellee/Cross-Appellant.

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Nos. 08-4738/4739

Appeal from the United States District Court

for the Northern District of Ohio at Cleveland.

No. 07-00649—John R. Adams, District Judge.

Argued: December 4, 2009

Decided and Filed: February 8, 2010 

Before: SILER, GILMAN, and ROGERS, Circuit Judges.

_________________

COUNSEL

ARGUED: Robert Armand Perez, Sr., THE PEREZ LAW FIRM CO., L.P.A., Cincinnati,

Ohio, for Appellant. Michael E. Smith, FRANTZ WARD LLP, Cleveland, Ohio, for

Appellee. ON BRIEF: Robert Armand Perez, Sr., THE PEREZ LAW FIRM CO., L.P.A.,

Cincinnati, Ohio, for Appellant. Michael E. Smith, FRANTZ WARD LLP, Cleveland, Ohio,

for Appellee. 

_________________

OPINION

_________________

RONALD LEE GILMAN, Circuit Judge. Sonya Hall received long-term disability

benefits for nearly five years through the National City Corporation Welfare Benefits Plan

(the Plan). Liberty Life Assurance Company of Boston (Liberty Life), the third-party claims

1

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administrator, terminated these benefits when it determined that Hall was no longer totally

disabled. The Plan then sought reimbursement for overpayments caused by retroactive

Social Security benefits’ being awarded to Hall. Hall responded by filing suit against the

Plan. 

Concluding that the termination of her long-term disability benefits was not arbitrary

and capricious, the district court denied Hall’s claim for reinstatement and further found that

the Plan was entitled to partial reimbursement. The court also imposed an equitable lien on

Hall’s Social Security benefits to allow the Plan to recover the overpayments. Hall has

appealed these decisions, and the Plan has cross-appealed the district court’s denial of its

request for attorney fees pursuant to 28 U.S.C. § 1927. For the reasons set forth below, we

AFFIRM the judgment of the district court regarding the Plan’s termination of benefits and

its claim for partial reimbursement, VACATE the district court’s imposition of an equitable

lien on Hall’s Social Security benefits and its denial of attorney fees to the Plan, and

REMAND the case to the district court for reconsideration of the equitable-lien and

attorney-fees issues.

 I. BACKGROUND

A. Factual background

Hall was a full-time employee at the National City Corporation and eligible for

benefits under the Plan. She started receiving short-term disability payments in May 2001

following spinal-fusion surgery. In November 2001, Hall began receiving long-term

disability payments in monthly installments of $2,333.45 each. Liberty Life informed Hall

by letter that she was required to apply for Social Security benefits and, if she was approved,

that those benefits would partially offset the amount paid by the Plan. The letter further

stated that Hall’s eligibility to continue receiving long-term disability benefits was

predicated on certification of her continued disability.

In December 2002, Hall received notice that she was required to undergo an

evaluation to determine whether she still met the definition of “totally disabled.” Hall

underwent an independent medical examination in June 2003. The examining doctor

concluded that although Hall might be able to return to work at some point in the future, she

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was still totally disabled. As a result of this examination, Liberty Life informed Hall by

letter that she would continue receiving long-term disability benefits, but added that it would

conduct periodic reevaluations to verify that she still met the “totally disabled” definition.

As part of these reevaluations, Liberty Life in 2005 submitted Hall’s medical records

for review by Dr. Gale G. Brown, Jr., board-certified in physical medicine, rehabilitation,

and internal medicine, and Dr. Peter M. Mirkin, board-certified in psychiatry and neurology.

Both doctors opined that Hall could return to work. Dr. Brown concluded that although Hall

was impaired, she was able to perform her job duties, noting that Hall frequently engaged

in such activities as driving, walking, and reading. Focusing on Hall’s psychiatric condition,

Dr. Mirkin similarly found nothing that would prevent Hall from resuming her job duties.

As an additional component of its review, Liberty Life requested a skills analysis

from a vocational expert. The expert issued a report, based on recommendations contained

in Dr. Brown’s report, finding that Hall could perform the duties of several occupations,

including a receptionist at a small business, a new-account clerk, an information clerk, or an

accounting clerk. 

Based on this review, Liberty Life concluded that Hall was no longer “totally

disabled” under the terms of the Plan. It therefore terminated her benefits in May 2006. Hall

appealed that decision, relying largely upon reports of Dr. Norton Winer from 2002 to 2004

in which he stated that Hall could not tolerate an eight-hour workday. Dr. Winer was Hall’s

treating physician.

Following a review by an independent medical panel, Liberty Life upheld its

determination that Hall was no longer eligible to receive benefits. As part of its assessment,

the panel solicited Drs. Stephen Vanna and Judith Willis, two physicians who were both

board-certified in psychiatry and neurology, to conduct separate file reviews to determine

whether Hall was “totally disabled” under the Plan’s terms. The two physicians concluded

that Hall no longer met this definition. Dr. Willis highlighted a report from Dr. Winer in

which Dr. Winer opined that Hall could “sit, push, pull, reach, grasp, and repetitively move

her wrist, elbow, shoulder, and ankle frequently, stand, walk, and occasionally, drive up to

two hours.” In a second report relied upon by Dr. Willis, Dr. Winer had also acknowledged

that Hall could work as a clerk. Dr. Vanna, in his analysis, relied in part on a telephone

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conversation with Dr. Winer, during which Dr. Winer told Dr. Vanna that Hall showed

“some disability, but probably [was] not totally disabled.” Based on this conversation and

his review of Hall’s medical records, Dr. Vanna concluded that Hall’s complaints were of

a subjective nature. 

During this time period, Hall was also pursuing Social Security benefits. Despite

denying her initial requests, the Social Security Administration in 2006 awarded Hall

retroactive benefits dating back to January 2002, the point in time at which it determined that

Hall was totally disabled.

B. Procedural background

Hall filed suit in March 2007, seeking reinstatement of her benefits. Concluding that

the Plan’s termination of benefits was not arbitrary and capricious, the district court denied

Hall’s motion for a judgment awarding benefits and instead granted the Plan’s motion for

judgment on the administrative record. Shortly before the court ruled on those two motions,

the Plan filed a motion to add a counterclaim seeking reimbursement for its overpayments

to Hall. The Plan contended that the overpayments came about when the Social Security

Administration awarded Hall long-term disability benefits retroactively, which entitled the

Plan to an offset per the terms of the Plan.

Following what it described as a “hailstorm of motions,” the court granted the Plan’s

motion for summary judgment on its claim for partial reimbursement. In that same order,

the court denied the Plan’s request for attorney fees that the Plan had incurred due to the

allegedly vexatious conduct of Hall’s attorney. 

II. ANALYSIS

A. Issues on appeal

Hall appeals the district court’s findings that the Plan’s termination of her disability

benefits was proper and that the Plan is entitled to reimbursement for the overpayments that

it made to Hall. On cross-appeal, the Plan contends that the district court erred by not

granting its request for attorney fees pursuant to 28 U.S.C. § 1927. We address each of these

issues in turn.

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B. Termination of benefits

Hall first argues that the Plan’s termination of her benefits was improper, and she

further asserts that the district court erroneously reviewed the Plan’s decision under the

arbitrary-and-capricious standard. After carefully considering the record on appeal, the

briefs of the parties, and the applicable law, and having the benefit of oral argument, we

agree with the district court’s analysis of these two issues. Hall has made no persuasive

claims of error on appeal, including her argument that the Plan is estopped from terminating

her disability benefits because it required Hall to seek Social Security benefits. Because the

district court articulated its reasoning in a thorough and comprehensive opinion, the issuance

of a detailed written opinion by us regarding these issues would be unduly duplicative. The

judgment rendered by the district court regarding the proper standard of review and the

Plan’s termination of Hall’s benefits is accordingly affirmed on the basis of the reasoning

detailed in its Opinion dated April 25, 2008.

Notwithstanding our affirmation of the district court’s analysis, we note two

inaccuracies in its opinion. First, in evaluating the Plan’s May 2006 determination that Hall

was no longer permanently disabled, the district court observed that both a neurosurgeon and

Dr. Winer called the results of a magnetic resonance imaging (MRI) of Hall’s lumbar spine

“completely normal.” But the MRI did not cover Hall’s cervical spine, which was the source

of her primary complaint of disability. Even without the MRI, however, there is was

sufficient evidence in the record to support the conclusion that Hall’s injuries did not

continue to render her completely disabled.

Secondly, the district court erroneously stated that Hall “unsuccessfully” appealed

a 2004 decision by an administrative law judge (ALJ) denying her Social Security benefits,

when in fact that decision was overturned on appeal to the district court in 2006. Hall was

subsequently found to be disabled and entitled to benefits by a different ALJ. The 2006

district court opinion is not particularly helpful to Hall, however, because it held only that

the ALJ improperly weighed medical evidence rather than calling upon a medical expert to

do so. Neither the court’s ruling on appeal nor the second ALJ’s decision provides a

reasoned explanation for why Hall was entitled to disability benefits. As such, these errors

do not change the outcome of the case.

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C. Reimbursement of overpayments

Hall next appeals the district court’s determination that the Plan is entitled to

reimbursement for the overpayments it made due to Hall’s retroactive receipt of Social

Security benefits. We similarly agree with the district court’s conclusion in this regard, and

we affirm on the basis of the court’s Opinion dated October 31, 2008, with the exception of

the court’s decision to impose an equitable lien directly upon Hall’s future Social Security

benefits for reimbursement of the Plan’s overpayments. Such a lien is prohibited by federal

statute.

A plan fiduciary is permitted to bring a claim for equitable relief to enforce the terms

of the plan. 29 U.S.C. § 1132(a)(3). For restitution of insurer overpayments to be of an

equitable nature, the restitution must involve the imposition of a constructive trust or

equitable lien on “particular funds or property in the [insured’s] possession.” Great-West

Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 213 (2002). The plan must identify a

particular fund, distinct from an insured’s general assets, and the portion of that fund to

which the plan is entitled. Sereboff v. Mid Atl. Med. Servs., Inc., 547 U.S. 356, 363 (2006).

Courts are not permitted, however, to place a lien directly on the Social Security

benefits themselves. 42 U.S.C. § 407(a) (“The right of any person to any future payment

under [federal Social Security law] shall not be transferable or assignable, at law or in equity,

and none of the moneys paid or payable . . . shall be subject to execution, levy, attachment,

garnishment, or other legal process . . . .”). The equitable lien in this case must therefore be

limited to a specifically identifiable fund (the overpayments themselves) within Hall’s

general assets, with the Plan entitled to a particular share (all overpayments due to her receipt

of Social Security benefits, not to exceed the amount of benefits paid). See Gilchrest v.

Unum Life Ins. Co. of Am., 255 F. App’x 38, 45-46 (6th Cir. 2007).

The lien imposed by the district court deviated from the principles set forth in

Gilchrest because the court imposed the lien directly on the Social Security benefits received

by Hall. This is impermissible because the Plan has no claim to Hall’s future Social Security

benefits prior to the point at which they are in her possession. The Plan conceded this point

during oral argument. Accordingly, we find that the district court erred in imposing an

equitable lien directly upon Hall’s future Social Security benefits. 

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D. Attorney fees

As a final matter, we address the district court’s denial of the Plan’s request for

attorney fees. A district court's decision to grant or deny sanctions, whether arising under

either 28 U.S.C. § 1927 or Rule 11 of the Federal Rules of Civil Procedure, is reviewed

under the abuse-of-discretion standard. Mich. Div.-Monument Builders of N. Am. v. Mich.

Cemetery Ass’n, 524 F.3d 726, 739 (6th Cir. 2008) (citing Ridder v. City of Springfield, 109

F.3d 288, 298 (6th Cir. 1997) ( “As with Rule 11 sanctions, we review an order awarding

attorney fees under § 1927 for an abuse of discretion.”)). “This court has defined an abuse

of discretion as a definite and firm conviction that the trial court committed a clear error of

judgment.” Arban v. W. Publ’g Corp., 345 F.3d 390, 404 (6th Cir. 2003) (citation and

internal quotation marks omitted). Such an error occurs “when the district court applies the

wrong legal standard, misapplies the correct legal standard, or relies on clearly erroneous

findings of fact.” Geier v. Sundquist, 372 F.3d 784, 789-90 (6th Cir. 2004) (citation

omitted).

Under 28 U.S.C. § 1927, an attorney “who so multiplies the proceedings in any case

unreasonably and vexatiously may be required by the court to satisfy personally the excess

costs, expenses, and attorneys’ fees reasonably incurred because of such conduct.” A court

may sanction an attorney under § 1927 for unreasonably and vexatiously multiplying the

proceedings even in the absence of any “conscious impropriety.” Rentz v. Dynasty Apparel

Indus., Inc., 556 F.3d 389, 396 (6th Cir. 2009) (citation omitted). The proper inquiry is not

whether an attorney acted in bad faith; rather, a court should consider whether “an attorney

knows or reasonably should know that a claim pursued is frivolous, or that his or her

litigation tactics will needlessly obstruct the litigation of nonfrivolous claims.” Id. (quoting

Ridder v. City of Springfield, 109 F.3d 288, 298 (6th Cir. 1997)). An award of fees under the

statute thus requires “a showing of something less than subjective bad faith, but something

more than negligence or incompetence.” Id. (quoting Red Carpet Studios Div. of Source

Advantage, Ltd. v. Sater, 465 F.3d 642, 646 (6th Cir. 2006)). 

The district court in this case was critical of Hall’s attorney, noting that the Plan “has

been forced to spend an inordinate amount of time and money defending against repeated

meritless motions filed by [Hall] in an attempt to have a second, third, or further bite at the

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apple in the litigation of her benefits claim.” Yet the district court declined to award the Plan

attorney fees “given Plaintiff’s purported financial situation.” 

That reason does not support the denial of fees. The rationale for the district court’s

decision—Hall’s “purported financial situation”—is an improper basis for denying fees

under § 1927 because the statute authorizes the imposition of sanctions only on “any attorney

or other person admitted to conduct cases.” 28 U.S.C. § 1927; see also Rentz, 556 F.3d at

395-96 (observing that fees under § 1927 may be imposed only on parties’ attorneys, rather

than on the parties themselves). No other reason was offered to support the denial of the

Plan’s request for attorney fees. Under an abuse-of-discretion standard, we cannot uphold

the district court’s reliance solely on a factor irrelevant to the § 1927 inquiry.

 III. CONCLUSION

For all of the reasons set forth above, we AFFIRM the judgment of the district court

regarding the Plan’s termination of benefits and its claim for partial reimbursement,

VACATE the district court’s imposition of an equitable lien on Hall’s Social Security

benefits and its denial of attorney fees to the Plan, and REMAND the case to the district

court for reconsideration of the equitable-lien and attorney-fees issues. 

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