Opinion ID: 217698
Heading Depth: 2
Heading Rank: 2

Heading: Humana's Request for Fees

Text: Humana asks this court for an award of reasonable attorney fees in its favor, though it did not seek them in the district court. ERISA authorizes an award of reasonable attorney fees to either party at the court's discretion. See 29 U.S.C. § 1132(g)(1). We have recognized a modest presumption in favor of awarding fees to the prevailing party, though that presumption can be rebutted. See Laborers' Pension Fund v. Lay-Com, Inc., 580 F.3d 602, 615 (7th Cir.2009), quoting Senese v. Chicago Area I.B. of T. Pension Fund, 237 F.3d 819, 826 (7th Cir.2001). Here, we find that Jackman Financial's position and the surrounding circumstances effectively rebut the presumption, so we deny Humana's request. In determining whether a fee award is appropriate under ERISA, we have long recognized two tests, both of which ask whether the losing party had a legitimate basis to bring its suit. See Production & Maintenance Employees' Local 504, Laborers' Int'l Union v. Roadmaster Corp., 954 F.2d 1397, 1402 (7th Cir.1992). Under the first test, an award of fees to a successful defendant in an ERISA suit may be denied if the plaintiff's position was both `substantially justified'meaning something more than non-frivolous, but something less than meritoriousand taken in good faith, or if special circumstances make an award unjust. See Herman, 423 F.3d at 696; Harris Trust & Savings Bank v. Provident Life & Accident Ins. Co., 57 F.3d 608, 616-17 (7th Cir.1995). Under the second test, we consider the following factors: (1) the degree of the offending party's culpability or bad faith; (2) the ability of the offending party to satisfy personally an award of attorney fees; (3) whether an award of attorney fees would deter other persons acting under similar circumstances; (4) the amount of benefit conferred on members of the plan as a whole; and, (5) the relative merits of the parties' positions. See Sullivan v. William A. Randolph, Inc., 504 F.3d 665, 671 (7th Cir.2007); Brewer v. Protexall, Inc., 50 F.3d 453, 458 (7th Cir.1995). This five-factor test is often used in conjunction with the substantially justified test and largely involves the same inquiry. See, e.g., Herman, 423 F.3d at 696; Bowerman v. Wal-Mart Stores, Inc., 226 F.3d 574, 593 (7th Cir.2000) (concluding that regardless of which test is used, the question asked is essentially the same); Quinn v. Blue Cross & Blue Shield Ass'n, 161 F.3d 472, 478 (7th Cir.1998) (same). Humana asserts that it should be awarded attorney fees because Jackman Financial's position was not substantially justified. The question is close, but we disagree. The indications here are that Jackman Financial's complaint was filed in good faith in an attempt to recover the outstanding balance it was owed. In the days following her son's death, Kelly intended to assign Torrence's plan proceeds to Jackman Financial to cover the cost of her son's funeral. It appears that neither Jackman Financial nor Kelly knew about or considered the facility-of-payment clause in Torrence's group plan at the time the assignment was executed. Long before Humana paid the policy proceeds, Jackman Financial gave Humana timely notice of its claim and the basis for it. Although the suit was not successful, it had an understandable foundation. Humana also argues that an award of fees in its favor would deter future conduct by similarly situated persons and would conserve plan expenses. On the merits, we agree with Humana that where an insurance plan contains a similar facility-of-payment provision, the insurer is able to select a substitute beneficiary at its discretion. Third parties seeking to recover by filing suit will likely be unsuccessful. Nevertheless, we do not believe that awarding fees to Humana in this case, in light of the assignment and Jackman Financial's payment of the funeral expenses in reliance upon it, will have any more deterrent effect than our clear statement that a facility-of-payment provision grants the insurer broad discretion. Future potential beneficiaries, as well as assignees of such potential beneficiaries, should take heed as to the broad selection authority granted to the insurer through these clauseslongstanding features of insurance policies. We do not discount the possibility of fee awards in future cases if similar facility-of-payment clauses defeat future unsuccessful challenges to insurers' exercises of discretion.