2008 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

1-29-2008

Hahnemann Univ Hosp v. All Shore Inc

Precedential or Non-Precedential: Precedential

Docket No. 05-4628

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PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

 

Nos. 05-4628 & 06-1825

 

HAHNEMANN UNIVERSITY HOSPITAL

v.

ALL SHORE, INC.;

ALL SHORE, INC. HEALTH PLAN;

ALL SHORE, INC. EMPLOYEE BENEFIT PLAN,

ALL SHORE, INC.;

ALL SHORE, INC. HEALTH PLAN,

 Defendants/Third-Party Plaintiffs

v.

PLAN VISTA SOLUTION, formerly NPPN,

 Third Party Defendant

All Shore, Inc. and *All Shore, Inc. Employee Benefit Plan,

 Appellants

*Amended pursuant to Clerk's Order of 11/23/05

 

On Appeal from the United States District Court

for the Eastern District of Pennsylvania

(D.C. Civil No. 03-cv-04406)

District Judge: Hon. Clifford Scott Green

 
2

Argued October 23, 2007

BEFORE: FISHER, STAPLETON

 and COWEN, Circuit Judges

(Filed: January 29, 2008)

William P. Marshall, Esq. (Argued)

3101 Trewigtown Road

P.O. Box 267

Colmar, PA 18915

Counsel for Appellants

Mark D. Herbert, Esq. (Argued)

Law Offices of Mark Douglas Herbert

2215 Ford Street

Golden, CO 80401-9931

Counsel for Appellee

 

OPINION

 

COWEN, Circuit Judge.

Defendants-Appellants, Allshore, Inc. Employee Benefit

Plan (“Allshore Plan”) and Allshore, Inc., appeal from the

District Court’s grant of summary judgment in favor of PlaintiffAppellee, Hahnemann University Hospital (“Hahnemann”). The

Appellants also appeal the District Court’s order granting

Hahnemann’s motion for attorney’s fees and costs. For the

following reasons, we will affirm the District Court’s grant of

summary judgment in favor of Hahnemann. However, we will

vacate and remand the order granting attorney’s fees and costs to

Hahnemann.

I. BACKGROUND

This case arises out of the medical treatment of a patient

at Hahnemann in March 1999. The patient was covered under
3

the Allshore Plan. The Allshore Plan was a health benefit plan

administered by Allshore, Inc., and regulated by the Employee

Retirement Income Security Act (“ERISA”). Under the terms of

the Allshore Plan, Allshore, Inc. exercised all discretionary

authority and control over the administration of the Allshore

Plan as well as the management and disposition of plan assets. 

The plan document gave Allshore, Inc. the ability to hire another

agency to perform claims processing and other specified services

in relation to the Allshore Plan. However, the plan document

stated that if such an agency was hired, it would not be

considered a fiduciary of the Allshore Plan. If such an agency

was hired, it would not exercise any discretionary authority or

responsibility held by Allshore, Inc. Allshore, Inc. hired Benefit

Concepts, Inc. (“BCI”) to act as claims administrator for the

Allshore Plan.

In April 1999, Hahnemann submitted a medical bill to the

Allshore Plan for approximately $250,000 for the costs incurred

with treating the patient at Hahnemann. Hahnemann submitted

its bill rather than the patient because the patient assigned her

claims for benefits under the Allshore Plan to Hahnemann. BCI

received Hahnemann’s claim because it was the claims

administrator of the Allshore Plan. Under the terms of the

Allshore Plan, the patient paid a $200 deductible. The Allshore

Plan would then pay 80 % of the first $10,000 in charges, and

100% of the charges thereafter. 

Upon receiving Hahnemann’s claim for benefits, BCI

sought to determine whether a preferred provider organization

(“PPO”) option applied to the claim. As a third-party claims

administrator, BCI entered into contracts with various PPOs

which allowed a health benefit plan access to the PPOs’ price

discounts, even though there might not have been an agreement

between the health benefit plan and the PPO itself. These are

called passive PPOs. Upon analyzing Hahnemann’s claim for

benefits, BCI determined that a 10 % discount might apply to

Hahnemann’s claim based upon a PPO established by MultiPlan,

Inc. (“MultiPlan”).

Hahnemann did not receive a check for the amount it

requested, or even an amount applying a 10 % discount. Instead,
4

the managing general underwriter concluded that a 40 %

discount was applicable to Hahnemann’s charges through a

different PPO. Specifically, the underwriter determined that the

National Preferred Provider Network (“NPPN”) PPO applied. 

Thus, Hahnemann only received 60 % (or approximately

$150,000) of the charges it originally submitted. Hahnemann

received this payment in September 1999.

After receiving payment, Hahnemann questioned the

applicability of the 40 % discount because it did not have a

contract with NPPN. However, Hahnemann did not know how

to question the payment because the explanation of benefits it

received accompanying the payment did not state where to

submit its claims for administrative review. Eventually,

Hahnemann’s counsel requested review from BCI in April 2000. 

Hahnemann sought review over whether the 40 % NPPN

discount was appropriate for the charges it submitted. 

In March 2003, NPPN advised BCI that the discount

should not have been applied to Hahnemann’s claim. After

waiting several more months without receiving the balance

owed, Hahnemann filed this action against the Allshore Plan and

Allshore, Inc. in July 2003. Hahnemann filed its complaint to

recover benefits owed pursuant to 29 U.S.C. § 1132(a)(1)(B) of

ERISA.

After the close of discovery, the parties filed dueling

motions for summary judgment. The District Court heard oral

argument on the motions on September 14, 2005. On September

15, 2005, the District Court granted Hahnemann’s motion for

summary judgment and denied the Appellants’ motion. It

deferred entry of final judgment so that Hahnemann could file a

motion regarding attorney’s fees and costs. 

The Appellants subsequently filed a motion for

reconsideration and Hahnemann filed a motion for attorney’s

fees and costs. On February 9, 2006, the District Court

conducted a hearing on the motion for reconsideration as well as

the motion for attorney’s fees and costs. On February 10, 2006,

the District Court granted in part the motion for reconsideration,
1

 The District Court initially awarded Hahnemann

$101,082.36 in its September 15, 2005 order. However, in its final

order of judgment, the District Court reduced the judgment award

to $100,982.29. 

2

 Initially, the Appellants filed their notice of appeal on

October 14, 2005, C.A. No. 05-4628, in response to the District

Court’s initial entry of summary judgment in favor of Hahnemann.

However, a final entry of judgment was not entered until February

10, 2006. Subsequently, Appellants filed a second notice of

appeal, C.A. No. 06-1825. 

5

only to change the judgment amount.1 It denied the motion for

reconsideration in all other respects. Also, the District Court

granted Hahnemann’s motion for attorney’s fees and costs. It

awarded Hahnemann $136,182.50 in attorney’s fees as well as

Court costs in the amount of $4,017.26 and $3,372.72 in travel

and expense costs.

The Defendants filed a motion to alter or amend

judgment. The District Court denied the motion on March 6,

2006. Subsequently, on March 8, 2006, the Defendants filed this

appeal.2

 

II. APPELLATE JURISDICTION

 AND STANDARD OF REVIEW

We have appellate jurisdiction pursuant to 28 U.S.C.

§ 1291. Our review over the District Court’s grant of summary

judgment in favor of Hahnemann is plenary. See Post v.

Hartford Ins. Co., 501 F.3d 154, 160 (3d Cir. 2007). We apply

the same standard as the District Court; specifically, “[s]ummary

judgment is appropriate only where, drawing all reasonable

inferences in favor of the nonmoving party, there is no genuine

issue as to any material fact and . . . the moving party is entitled

to judgment as a matter of law.” Lexington Ins. Co. v. W. Pa.

Hosp., 423 F.3d 318, 322 n.2 (3d Cir. 2005)(internal quotation

marks and citations omitted). “‘An award of . . . attorneys’ fees

to a prevailing plaintiff in an ERISA case is within the discretion

of the district court and may only be reversed for abuse of
6

discretion.’” McPherson v. Employees Pension Plan of Am. ReIns. Co., 33 F.3d 253, 256 (3d Cir. 1994)(quoting Schake v. Colt

Indus. Operating Corp. Severance Plan, 960 F.2d 1187, 1190 (3d

Cir. 1992)). We review the District Court’s factual

determinations, “including [the court’s] determination of an

attorney’s reasonable hourly rate and the number of hours he or

she reasonably worked on the case, for clear error.” United

Auto. Workers Local 259 v. Metro Auto Ctr., 501 F.3d 283, 290

(3d Cir. 2007)(internal quotation marks and citation omitted). 

We exercise plenary review over the legal standards employed

by the District Court used in calculating the award. 

See id. (citations omitted).

III. DISCUSSION

On appeal, Appellants raise several issues. First, they

assert that the District Court erred in granting summary

judgment in favor of Hahnemann because its claim was timebarred. Second, they argue that Hahnemann failed to timely file

its claim for administrative review. Third, they assert that

material issues of fact precluded the District Court’s entry of

summary judgment because a 10 % discount applied to

Hahnemann’s charges. Fourth, they argue that the entry of a

monetary judgment against Allshore, Inc. was improper. 

Finally, the Appellants make several arguments objecting to the

District Court’s award of attorney fees and costs. Each of these

arguments will be considered in turn. 

A. Statute of Limitations

Hahnemann claims that it is entitled to recover unpaid

benefits pursuant to 29 U.S.C. § 1132(a)(1)(B) of ERISA. This

section allows a plan participant or a beneficiary “to recover

benefits due to him under the terms of the plan, to enforce his

rights under the terms of the plan, or to clarify his rights to future

benefits under the terms of the plan.” Id. ERISA does not

include a specific statute of limitations for claims brought under

this statutory provision. However, we have stated that, “[a]s a

general rule, when Congress omits a statute of limitations for a

federal cause of action, courts ‘borrow’ the local time limitation

most analogous to the case at hand.” Gluck v. Unisys Corp., 960
7

F.2d 1168, 1179 (3d Cir. 1992)(internal quotation marks and

citations omitted). The statutory limitation most applicable to a

claim for benefits under Section 1132(a)(1)(B) is a breach of

contract claim. See id. at 1181. In Pennsylvania, a breach of

contract claim has a statute of limitations of four years. 42 Pa.

Cons. Stat. Ann. § 5525(a)(8). The parties are allowed to

contract for a shorter limitation period, so long as the contractual

period is not manifestly unreasonable. See, e.g., Hosp. Support

Servs., Ltd. v. Kemper Group, Inc., 889 F.2d 1311 (3d Cir.

1989). 

The Appellants argue that the plan document contained a

one-year limitation period. They assert that this period barred

Hahnemann’s July 2003 complaint, which was filed almost four

years after Hahnemann received the improper payment. The

Appellants rely on Article X of the plan document entitled,

“Filing a Claim.” Section 7 of that article states that “[a]ll

claims must be filed with the Plan within the twelve (12) month

period from the date of the expense.” 

We reject Appellants’ assertion that this clause created a

contractual statute of limitations on Hahnemann’s cause of

action for benefits under Section 1132(a)(1)(B). This provision

in the plan document only applied to the filing of “claims” to the

plan. It did not constitute the establishment of a contractual

statute of limitations for a beneficiary of the plan to bring a

§ 1132(a)(1)(B) action under ERISA. Furthermore, we note that

Hahnemann complied with the provision by submitting its claim

for benefits to the Allshore Plan in April 1999, one month after

the expenses were incurred in March 1999.

Next, Appellants allude to the possibility that a three-year

statute of limitations barred Hahnemann’s action. Specifically,

they assert that the statute of limitations set forth in 29 U.S.C. §

1113 of ERISA applies. That section states that:

No action may be commenced under

this subchapter with respect to a

fiduciary’s breach of any

responsibility, duty, or obligation

under this part, or with respect to a
3

 Additionally, the District Court factually determined that

Hahnemann’s claim would satisfy the three-year statute of

limitations set forth in Section 1113(2). To the extent that this

three-year period applies, it would only apply to the claim against

Allshore, Inc. Furthermore, we would conclude that the District

Court’s factual determination was not clearly erroneous based upon

the lack of actual knowledge of the breach of fiduciary duty. See

Gluck v. Unisys Corp., 960 F.2d 1168, 1177 (3d Cir. 1992). 

8

violation of this part, after the earlier

of -

(1) six years after (A) the date of the

last action which constituted a part of

the breach or violation, or (B) in the

case of an omission the latest date on

which the fiduciary could have cured

the breach or violation, or 

(2) three years after the earliest date

on which the plaintiff had actual

knowledge of the breach or violation.

29 U.S.C. § 1113. Appellants assert that Hahnemann’s action is

untimely under this section because Hahnemann filed its

complaint in July 2003, more than three years after it was aware

of the improper payment. However, Appellants’ argument

overlooks the fact that Hahnemann filed its complaint to receive

benefits pursuant to Section 1132(a)(1)(B). As previously

explained, a four-year statute of limitations applies under the

circumstances of this case in light of Pennsylvania’s breach of

contract statute of limitations. Hahnemann filed the complaint in

July 2003, less than four years after it was aware of the improper

payment. Therefore, the complaint is timely because it was filed

within the applicable four-year statute of limitations period.3

B. Time to File Administrative Review

Second, Appellants assert that Hahnemann failed to

timely file its request for administrative review under the terms

of the Allshore Plan. Hahnemann filed its request for

administrative review in April 2000. This review resulted in
9

NPPN concluding that the 40 % discount did not apply to

Hahnemann’s claim for benefits.

 

The Allshore Plan states that if one believed that a claim

was improperly settled, the following process was available: 

“[w]ithin sixty (60) days of receiving notice of the claim

settlement, request a review of the processed claim by written

request to the Plan. The Plan will review the processed claim

and inform you whether or not an error was made.” The

Appellants assert that because Hahnemann did not submit its

request for administrative review until April 2000

(approximately seven months after receiving the improper

payment applying the 40 % discount), it did not comply with the

sixty-day time period set out in the Allshore Plan. Hahnemann

responds that the document which accompanied the payment

applying the 40 % discount fell short of complying with

ERISA’s statutory and regulatory requirements. Thus,

Hahnemann asserts that the sixty-day window to apply for

administrative review was never triggered. 

ERISA states that:

In accordance with regulations of the

Secretary, every employee benefit

plan shall -

(1) provide adequate notice in

writing to any participant or

beneficiary whose claim for benefits

under the plan has been denied,

setting forth the specific reasons for

such denial, written in a manner

calculated to be understood by the

participant, and 

(2) afford a reasonable opportunity to any

participant whose claim for benefits has been

denied for a full and fair review by the appropriate

named fiduciary of the decision denying the claim.

29 U.S.C. § 1133. Furthermore, the regulations in 1999

provided that a notice of a claim denial must state:
4

 The regulation has since been amended. 

5

 Unlike Epright, Hahnemann was not the plan participant.

Rather, the patient who received the treatment at Hahnemann was

the plan participant. However, the Appellants do not contest that

Hahnemann is a beneficiary of the Allshore Plan. See 29 C.F.R.

§ 2560.503-1(f)(4)(stating that notice must state appropriate steps

if beneficiary wishes to submit claim for review). Furthermore,

Appellants do not contest that the plan participant assigned her

claims to Hahnemann. See, e.g., Principal Mutual Life Ins. Co. v.

Charter Barclay Hosp., Inc., 81 F.3d 53, 55-56 (7th Cir.

1996)(stating that if there is a valid assignment, the hospital

10

(1) The specific reason for the

denial;

(2) Specific reference to pertinent

plan provisions on which the denial

is based; 

(3) A description of any additional

material or information necessary for

the claimant to perfect a claim and

an explanation why such material or

information is necessary; and 

(4) Appropriate information as to the

steps to be taken if the participant or

beneficiary wishes to submit his or

her claim for review.

29 C.F.R. § 2560.503-1(f)(1999).4

 The Appellants do not

contest that the notice to Hahnemann accompanying the

September 1999 payment failed to comply with these

regulations. Indeed, the accompanying document did not state

any information to put Hahnemann on notice regarding how to

submit a claim for administrative review. Because the letter to

Hahnemann did not state the appropriate steps for administrative

review, the sixty-day time bar to seek administrative review was

never triggered. See, e.g., Epright v. Envtl. Res. Mgmt., Inc.

Health & Welfare Plan, 81 F.3d 335, 342 (3d Cir. 1996)(citing

White v. Jacobs Eng’g Group Long Term Disability Plan, 896

F.2d 344, 350 (9th Cir. 1989)).5

 Accordingly, Hahnemann’s
becomes the only claimant because the original claimant gives up

her claim by the assignment). 

6

 Additionally, we note that the review proceeded as if

Hahnemann’s request for administrative review was timely. This

resulted in NPPN concluding that the 40 % discount was improper.

 

7

 We note that Appellants cited to a facility agreement

between Hahnemann and MultiPlan during the District Court

proceedings (but not on appeal). However, even if the Appellants

did rely on this agreement on appeal, we note that the agreement

stated that payment needed to be made within thirty (30) days from

receipt of the bill for any discount to apply. Otherwise, any

payment received after thirty days would be paid at billed charges.

Hahnemann was paid well after this time period expired.

Additionally, it was not even paid an amount that applied a 10 %

11

request for review seven months after actually receiving the

payment applying the improper 40 % discount was timely

because the sixty-day window set out in the Allshore Plan was

never triggered. The fact that Hahnemann correctly guessed to

submit its claim to BCI for review is of no consequence because

the letter which accompanied the improper payment failed to

state the proper steps that Hahnemann could take in seeking

administrative review.6

C. Applicability of a 10 % Discount

Third, Appellants assert that the District Court erred in

granting summary judgment in favor of Hahnemann because

material issues of fact existed regarding the applicability of

whether a 10 % discount applied to Hahnemann’s claim. 

Specifically, the Appellants allude to contracts between

MultiPlan and BCI as well as Donald Rubin, Inc. and BCI. The

two MultiPlan agreements relied on by Appellants on appeal

were applicable to practitioners. These agreements were not

applicable to Hahnemann’s claim for benefits. Indeed, Mr.

Christopher Moyer, the PPO Manager designated by BCI,

testified during his deposition that these contracts did not apply

to Hahnemann’s claims.7

 Furthermore, Appellants cannot rely
discount. Thus, any discount under this agreement could not have

applied based on these circumstances. 

12

on their conclusory statements that Hahnemann had a contract

under the Rubin PPO to extend a discount to the charges in this

case. See Ridgewood Bd. of Educ. v. N.E. ex rel. M.E., 172

F.3d 238, 252 (3d Cir. 1999)(noting that conclusory allegations

do not satisfy a nonmoving party’s duty to show that a material

issue of fact exists once the moving party points to evidence

demonstrating that there is no issue of material fact). Thus, there

was no material issue of fact with respect to this issue. 

D. Judgment Against Allshore, Inc.

Next, Allshore, Inc. asserts that the District Court should

not have entered judgment against it as an entity. Recently, we

stated that when a plaintiff seeks recovery of benefits pursuant to

Section 1132(a)(1)(B), “the defendant is the plan itself (or plan

administrators in their official capacities only).” Graden v.

Conexant Systems, 496 F.3d 291, 301 (3d Cir. 2007)(emphasis

added). Thus, if entitlement to benefits is established, the court

can direct the plan administrator to pay them from the assets of

the plan, much as a trustee may be compelled to satisfy a trust

obligation from trust assets. See, e.g., Hall v. Nat’l Gypsum Co.,

105 F.3d 225, 229-30 (5th Cir. 1997). 

However, Hahnemann did not sue Allshore, Inc. seeking

benefits from the Allshore Plan’s assets. Rather, it sued both the

Allshore Plan and Allshore, Inc., and requested that it “recover

of and from Allshore [Inc.] and the [Allshore] Plan, jointly and

severally.” Therefore, the judgment Hahnemann secured against

Allshore, Inc. was not in its official capacity. The mere fact that

Hahnemann established that it was entitled to benefits from the

Allshore Plan did not make Allshore, Inc. liable in an individual

capacity. Indeed, ERISA states that, “[a]ny money judgment

under this subchapter against an employee benefit plan shall be

enforceable only against the plan as an entity and shall not be

enforceable against any other person unless liability against such

person is established in his individual capacity under this

subchapter.” 29 U.S.C. § 1132(d)(2). Nevertheless, this does
13

not necessarily mean that Allshore, Inc. cannot be held

individually liable. Allshore, Inc. can be held liable if the facts

established an individual basis against it. See id. Two possible

bases appeared to arise in this case for Allshore, Inc.’s liability: 

(1) that Allshore, Inc. agreed to be financially liable for the

medical expenses the patient incurred at Hahnemann; and (2)

that Allshore, Inc., as plan administrator, owed a fiduciary duty

which it breached by refusing to pay the claim without any

justification. It appeared that the District Court accepted both of

these theories of liability. For the following reasons, we will

affirm the judgment against Allshore, Inc., based upon this

second rationale.

When a denial of “benefits due” arises from a plan

administrator’s breach of its fiduciary obligations to the

claimant, Sections 1132(a)(1)(B) and (d) permit the beneficiary

to seek redress for the breach directly from the plan

administrator as a fiduciary. Indeed, as the Supreme Court has

noted:

a fiduciary has obligations other

than, and in addition to, managing

plan assets . . . . For example . . . a

plan administrator engages in a

fiduciary act when making a

discretionary determination about

whether a claimant is entitled to

benefits under the terms of plan

documents . . . . ERISA specifically

provides a remedy for breaches of

fiduciary duty with respect to the

interpretation of plan documents and

the payment of claims, one that is

outside the framework of the second

subsection . . . and one that runs

directly to the injured beneficiary. §

502(a)(1)(B).

Varity Corp. v. Howe, 516 U.S. 489, 511-12 (1996)(internal

citations omitted and emphasis added). Thus, a breach of these

fiduciary obligations will satisfy the limitations set forth in
8

 Additionally, we note that during the February 9, 2006

oral argument before the District Court, Allshore, Inc.

acknowledged that it was a proper party. Indeed, Allshore, Inc.

noted that the only question with respect to its liability was whether

the statute of limitations against it as an entity expired before

Hahnemann filed suit. 

14

Section 1132(d) because there is an individual basis for

recovery. 

As previously noted, Allshore, Inc. was the plan

administrator and exercised all discretionary authority and

control over the administration of the Allshore Plan as well as

the management and disposition of plan assets. Thus, Allshore,

Inc. was clearly a fiduciary to the plan. See 29 U.S.C. §

1002(21)(A)(stating that a person is a fiduciary with respect to

the plan if he exercises any discretionary authority or

discretionary control respecting management of the plan or has

authority or discretionary responsibility in the administration of

the plan). ERISA requires that a fiduciary “discharge his duties

with respect to a plan solely in the interest of the participants and

beneficiaries.” 29 U.S.C. § 1104(a)(1). Furthermore, a fiduciary

must discharge his duties “with the care, skill, prudence, and

diligence under the circumstances then prevailing that a prudent

man acting in a like capacity and familiar with such matters

would use.” 29 U.S.C. § 1104(a)(1)(B). 

Upon reviewing the record with respect to the

circumstances surrounding the payment (or lack thereof) of

benefits to Hahnemann, there is ample evidence to support the

finding that Allshore, Inc. breached a fiduciary duty that it owed

to Hahnemann as assignee of the patient in this case. See 29

U.S.C. § 1104 (discussing obligations fiduciary owes to plan

participants and beneficiaries); cf. Varity Corp., 516 U.S. at 506

(illustrating conduct by a plan administrator that amounts to a

breach of fiduciary duty). Therefore, the District Court did not

err in entering judgment against Allshore, Inc.8

E. Attorney’s Fees and Costs
15

Finally, Appellants contest the District Court’s award of

attorney’s fees and costs to Hahnemann. The District Court had

discretion to award attorney’s fees to Hahnemann in this ERISA

suit. See 29 U.S.C. § 1132(g)(1). ERISA allows a prevailing

party to recover “a reasonable attorney’s fee and costs of

action.” Id. Before awarding fees, a District Court must

consider several factors.

These include: (1) the offending

party’s culpability or bad faith; (2)

the ability of the offending parties to

satisfy the award of attorney’s fees;

(3) the deterrent effect of an award

of attorney’s fees; (4) the benefit

conferred upon members of the

[health benefit] plan as a whole; and

(5) the relative merits of the parties’

positions.

Martorana v. Bd. Trs. of Steamfitters Local Union 420 Health,

Welfare & Pension Fund, 404 F.3d 797, 804 (3d Cir.

2005)(citing Ursic v. Bethlehem Mines, 719 F.2d 670, 673 (3d

Cir. 1983)). The Appellants do not argue on appeal that the

District Court improperly applied these factors in deciding to

award attorney’s fees. Instead, they make several arguments

seeking to reduce the fee award.

A useful starting point for determining the reasonableness

of the fee is the lodestar calculation. See United Auto. Workers,

501 F.3d at 290 (citing Hensley v. Eckerhart, 461 U.S. 424, 433

(1983)). Under the lodestar approach, a court determines the

reasonable number of hours expended on the litigation

multiplied by a reasonable hourly rate. See id. The product of

this calculation “is a presumptively reasonable fee, but it may

still require subsequent adjustment.” Id. (citations omitted).

In this case, with one minor exception, the Appellants do

not challenge the hourly rate charged. Instead, Appellants assert

that the time spent by Hahnemann’s counsel on certain things

should not have been included in the fee award. First, the

Appellants assert that the fee award should be proportional to the
16

damage award. Second, they assert that Hahnemann should not

have been awarded attorney’s fees for certain “secretarial

services” performed by Hahnemann’s counsel. This marks

Appellants’ only argument with respect to the reasonableness of

the hourly rate (and only applies to certain hours alleged by

Hahnemann). Third, Appellants assert that the fee award should

be reduced because Hahnemann’s counsel was from Colorado. 

They argue that had Hahnemann chosen local counsel, certain

fees including researching local rules would not have been

incurred. On a related issue, the Appellants also argue that they

should not be responsible for Hahnemann counsel’s travel costs. 

They assert that had Hahnemann chosen local counsel, these

travel expense costs would not have been incurred. Fourth,

Appellants assert that Hahnemann paid its counsel on a

contingent fee basis, which would have resulted in a

substantially reduced fee award. Finally, the Appellants argue

that the District Court improperly awarded Hahnemann

attorney’s fees for fees incurred by counsel during the prelitigation administrative process. We consider each of these

arguments in turn.

i. A “proportional” fee award

First, the Appellants argue that the District Court erred by

awarding Hahnemann approximately $136,000 in attorney’s fees

when the summary judgment award was only approximately

$100,000. They assert that an attorney’s fees award in an

ERISA case such as this should be approximately one-third of

the damage award. We reject this theory. Recently, this Court

joined several other Courts in rejecting a proportionality rule for

attorney’s fees awarded under ERISA. See United Auto.

Workers, 501 F.3d at 295 (citing Bldg. Serv. Local 47 v.

Grandview Raceway, 46 F.3d 1392, 1401 (6th Cir. 1995);

Operating Eng’rs Pension Trusts v. B & E Backhoe, Inc., 911

F.2d 1347, 1355 (9th Cir. 1990); Bd. of Trs. of the Hotel & Rest.

Employees, Local 25 v. Madison Hotel, Inc., 43 F. Supp. 2d 8,

14 (D.D.C. 1999)). Thus, we will not disturb the fee award

based on this argument. 

ii. Fees for certain “secretarial services”
9

 We note that this is the only issue Appellants raise on

appeal with respect to the District Court’s award of costs.

Therefore, we decline to address the issue of the award of Court

costs to the extent that some of these costs might have fallen

outside of 28 U.S.C. § 1920. See, e.g., Agredano v. Mut. of Omaha

Cos., 75 F.3d 541, 544 (9th Cir. 1996)(holding that Section

1132(g)(1)’s “allowance for ‘costs of action’ empowers courts to

17

Next, the Appellants assert that the District Court abused

its discretion in awarding Hahnemann attorney’s fees for

“secretarial services” at the same rate as applied to “legal

services.” Appellants argue that the District Court awarded

Hahnemann fees at a legal rate when counsel was only

performing secretarial functions, such as typing. However,

Hahnemann’s counsel testified that he does not dictate or

handwrite a document and then submit it to his secretary for

typing. Rather, he testified that his work is a simultaneous

process where a word processor replaces dictation or

handwriting. He testified that this process is faster than actually

dictating a document, giving it to his secretary for typing, then

reviewing and editing the typewritten document. In light of this

testimony, we will not disturb the fee award based on this

argument. 

iii. Attorney’s fees for time spent researching local rules and for

travel costs incurred by Colorado counsel

Third, Appellants argue that they should not have to pay

Hahnemann for the time its counsel spent reviewing local rules. 

Hahnemann’s counsel was from Colorado. Appellants assert

that had Hahnemann chosen local counsel, he would not have

had to review the local rules. Upon considering this assertion,

we conclude that we will not disturb the fee award based on this

argument. 

Additionally, Appellants argue that the award to

Hahnemann for its Colorado counsel’s travel and associated

expenses was improper. Appellants assert that “if Hahnemann

retained an equally competent local counsel, these expenses

would never have been incurred.”9

 Section 1132(g)(1) of
award only the types of ‘costs’ allowed by 28 U.S.C. § 1920, and

only in the amounts allowed by section 1920 itself, by 28 U.S.C.

§ 1821 or by similar such provisions.”)(citation omitted); see also,

Anderson v. Unum Life Ins. Co. of Am., Civ. No. 01-894, 2007

WL 604728, at *15-16 (M.D. Ala. Feb. 22, 2007)(noting that costs

are taxable only if they are specified by statute and that costs not

enumerated under 28 U.S.C. § 1920 are not allowed under Section

1132(g)(1) of ERISA)(citations omitted); Neyer, Tiseo & Hindo,

Ltd. v. Russell, Civ. No. 92-2983, 1994 WL 158917, at *3-4 (E.D.

Pa. Apr. 29, 1994). 

18

ERISA gives a District Court discretion to award “costs” in

addition to attorney’s fees. We have stated that “under normal

circumstances, a party that hires counsel from outside of the

forum of the litigation may not be compensated for travel time,

travel costs, or the costs of local counsel.” Interfaith Cmty. Org.

v. Honeywell Int’l, Inc., 426 F.3d 694, 710 (3d Cir. 2005). 

“However, where forum counsel are unwilling to represent

plaintiff, such costs are compensable.” Id. In this case, there is

nothing in the record to suggest that counsel from within the

forum was unwilling to represent Hahnemann in this straight

forward, albeit lengthy Section 1132(a)(1)(B) action. Therefore,

we will vacate and remand the District Court’s award of travel

and expense costs. On remand, the District Court can determine

whether counsel in the forum would have been unwilling to

represent Hahnemann. If so, then including these travel costs

and expenses was proper. If not, then they should be stricken

from the judgment. 

iv. The lodestar approach versus the contingency fee approach

Fourth, Appellants assert that the evidence demonstrates

that Hahnemann’s counsel charged Hahnemann on a contingent

fee basis. Appellants assert that “the evidence in this case

reflects a contingent fee agreement which would have awarded

the Plaintiff’s attorney substantially less amount.” While this

statement might be true, it does not provide a basis for this Court

to vacate the attorney’s fee award. 

In City of Burlington v. Dague, 505 U.S. 557, 565-66
19

(1992), the Supreme Court noted that it has “generally turned

away from the contingent-fee model - which would make the fee

award a percentage of the value of the relief awarded in the

primary action - to the lodestar model.” This is true even though

the lodestar model often results in a larger fee award. See id. at

566. Indeed, in Blanchard v. Bergeron, 489 U.S. 87 (1989), the

Supreme Court reviewed an attorney fee award under 42 U.S.C.

§ 1988. However, in that case, the Supreme Court approved of

the lodestar approach, “even though it produced a fee that

substantially exceeded the amount provided in the contingent-fee

agreement between plaintiff and his counsel.” City of

Burlington, 505 U.S. at 566 (citing Blanchard, 489 U.S. at 96). 

Thus, the District Court’s application of the lodestar approach,

as opposed to a contingency fee approach, was plainly

appropriate. 

v. Attorney’s fees during the pre-litigation administrative

 process under ERISA

Finally, Appellants assert that the District Court erred in

awarding attorney’s fees to Hahnemann for those fees incurred

during the pre-litigation administrative process. ERISA’s

attorney’s fee provision states that, “[i]n any action under this

subchapter (other than an action described in paragraph (2)) 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). The question presented in

this appeal, and one of first impression in this Circuit, is whether

ERISA’s attorney’s fee provision limits a District Court to award

only those fees incurred in formal judicial actions, or whether it

also covers the fees incurred during the pre-litigation

administrative process. Five Circuit Courts have considered this

question, and all five have concluded that ERISA does not allow

for the recovery of attorney’s fees incurred during pre-litigation

administrative proceedings. See Parke v. First Reliance

Standard Life Ins. Co., 368 F.3d 999, 1010-11 (8th Cir. 2004);

Rego v. Westvaco Corp., 319 F.3d 140, 150 (4th Cir. 2003);

Peterson v. Cont’l Cas. Co., 282 F.3d 112, 119-21 (2d Cir.

2002); Anderson v. Procter & Gamble Co., 220 F.3d 449, 452-

456 (6th Cir. 2000); Cann v. Carpenters’ Pension Trust Fund for

N. Cal., 989 F.2d 313, 315-17 (9th Cir. 1993). For the following
20

reasons, we agree with our sister circuits, and conclude that the

fees incurred during administrative proceedings prior to filing

suit are unavailable under 29 U.S.C. § 1132(g)(1).

As previously noted, Section 1132(g)(1) allows a District

Court to award attorney’s fees and costs incurred in “any action

under this subchapter.” We must determine whether Congress

intended the term “action” to include administrative review

proceedings related to the judicial action. “Used in a statute, the

term ‘action’ traditionally connotes a formal adversarial

proceeding under the jurisdiction of a court of law.” Peterson,

282 F.3d at 119 (citations omitted).

While the Supreme Court has not reached the issue of

whether the ERISA attorney’s fee statutory provision allows for

the award of fees incurred during pre-litigation administrative

proceedings, its decisions interpreting other fee statutes support

our holding today. For example, the Supreme Court has

construed the phrase “action or proceeding” under Title VII to

provide for fee awards for administrative proceedings which are

not court actions. See N.Y. Gaslight Club, Inc. v. Carey, 447

U.S. 54, 61 (1980); see also, Peterson, 282 F.3d at 121

(comparing the statutory language of Title VII as interpreted by

the Supreme Court in N.Y. Gaslight Club, and noting that the

ERISA attorney’s fee statutory provision does not contain the

word “or proceedings”); Cann, 989 F.2d 316 (same). As noted

by the Supreme Court, “Congress’ use of the broadly inclusive

disjunctive phrase “action or proceeding’ indicates an intent to

subject the losing party to an award of attorney’s fees and costs

that includes expenses incurred for administrative proceedings.” 

N.Y. Gaslight Club, 447 U.S. at 61. Unlike Title VII, “the text

of ERISA contains no similar reference to ‘proceedings,’

providing strong evidence that Congress did not intend ERISA

to have as broad a reach as Title VII.” Peterson, 282 F.3d at

121.

Hahnemann cites to Pennsylvania v. Delaware Valley

Citizens’ Council for Clean Air, 478 U.S. 546 (1986), to support

its position that the award of pre-litigation fees was proper. In

that case, the Supreme Court “held that, in interpreting a

statutory provision authorizing attorneys’ fees, reference to an
21

‘action,’ rather than an ‘action or proceeding,’ is ‘not a sufficient

indication that Congress intended [the fee-shifting provision] to

apply only to judicial, and not administrative, proceedings.’”

Anderson, 220 F.3d at 453 (citing Del. Valley, 478 U.S. at 559). 

However, the Sixth, Eighth and Ninth Circuits have all

distinguished Delaware Valley because the Supreme Court

authorized the award of attorney’s fees “only when the

administrative proceedings occurred after the litigation and

where the administrative proceedings were necessary to enforce

a final judgment that had been already obtained.” Parke, 368

F.3d at 1011 (citing Anderson, 220 F.3d at 453; Cann, 989 F.2d

at 317). We agree with these Courts that Delaware Valley is

distinguishable. Unlike the administrative proceedings in

Delaware Valley, the administrative proceedings related to

Hahnemann’s claim, while mandatory in its claim for benefits

under ERISA, were not “necessary for enforcement of a judicial

decree nor so closely connected to the resolution of the judicial

action as to fall within the scope of . . . Delaware Valley.” Id.

Therefore, Hahnemann’s reliance on Delaware Valley is

misplaced. 

Finally, Hahnemann asks us to apply a “modified rule”

as stated in Peterson and Seal v. John Alden Life Insurance Co.,

437 F. Supp. 2d 674 (E.D. Mich. 2006). In both cases, the

prevailing party was awarded attorney’s fees for the

administrative review fees incurred during a court-ordered

remand. See Peterson, 282 F.3d at 122; Seal, 437 F. Supp. 2d at

683-87. However, unlike Peterson and Seal, there was never a

court-ordered remand for further administrative proceedings in

this case. Therefore, we need not reach the issue of whether

Hahnemann’s so-called “modified rule” should apply. That

issue, is best left to be decided by another court.

In sum, today we join our sister Circuits and hold that

awarding a prevailing party attorney’s fees for pre-litigation

administrative proceedings under ERISA is inappropriate. 

Therefore, we will vacate and remand the District Court’s

attorney’s fees award so that it can be recalculated in light of this
10 In recalculating the attorney’s fees on remand, the

District Court should note that Hahnemann “is entitled collect a

reasonable amount for fees and costs incurred in initiating suit in

the District Court.” Peterson, 282 F.3d at 121 n.5. Thus, we agree

with the Second Circuit that the time spent drafting the complaint

is properly considered as part of the litigation in the District Court,

even though it occurred prior to filing. See id.

22

opinion.10

IV. CONCLUSION

In conclusion, we affirm the grant of summary judgment

in favor of Hahnemann. However, because the District Court

improperly included the amount of time spent by Hahnemann’s

counsel during the pre-litigation administrative process, we

vacate and remand the award of attorney’s fees for further

proceedings consistent with this opinion. The award of travel

and expense costs is also vacated and remanded for further

proceedings because the District Court awarded travel and

related expenses to Hahnemann for its counsel located outside of

the forum, even though there was no finding that forum counsel

would have been unwilling or unable to represent Hahnemann. 

Finally, because the District Court separately awarded Court

costs, as well as and travel and expense costs in its judgment,

and the Appellants did not object on appeal to any part of the

award of Court costs, we will not disturb the District Court’s

award of Court costs.