Court Opinion

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Opinions of the United
2003 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

5-16-2003

Carney v. Local 98 Pension
Precedential or Non-Precedential: Non-Precedential

Docket 02-2679

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                                                               NOT PRECEDENTIAL

                        UNITED STATES COURT OF APPEALS
                             FOR THE THIRD CIRCUIT

                                Nos. 02-2679 and 02-3488

                                  ANDREW CARNEY

                                            v.

      INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS LOCAL
       UNION 98 PENSION FUND; SCOTT ERNSBERGER, ADMINISTRATOR;
         JOHN J. DOUGHERTY, TRUSTEE; EDWARD NEILSON, TRUSTEE;
         JOSEPH AGRESTI, TRUSTEE; THOMAS J. REILLY, JR.,TRUSTEE;
           DENNIS LINK, TRUSTEE; WILLIAM C. RHODES, TRUSTEE

                       International Brotherhood of Electrical Workers
                                Local Union 98 Pension Fund,
                                                    Appellant

               APPEAL FROM THE UNITED STATES DISTRICT COURT
                 FOR THE EASTERN DISTRICT OF PENNSYLVANIA
                               D.C. Civil No. 00-cv-06270
                   District Judge: The Honorable James McGirr Kelly

                                  Argued April 8, 2003

                Before: BECKER,* BARRY and BRIGHT,** Circuit Judges

  *
      Judge Becker completed his term as Chief Judge on May 4, 2003.
  **
    The Honorable Myron H. Bright, Senior Circuit Judge, United States Court of
Appeals for the Eighth Circuit, sitting by designation.
                              (Opinion Filed: May 16, 2003)

Laurance E. Baccini, Esq.
Julie L. Fuchs, Esq.
Klehr, Harrison, Harvey,
Branzburg & Ellers
260 South Broad Street, Suite 400
Philadelphia, PA 19102

Attorneys for Appellant

Edward J. Foley, Jr., Esq.
923 Fayette Street
Conshohoken, PA 19428

Attorney for Appellee

                                       __________

                                        OPINION
                                       __________

BARRY, Circuit Judge

       This appeal arises out of a lawsuit brought by appellee Andrew Carney against the

International Brotherhood of Electrical Workers Local 98 Pension Fund (“the Fund”) and

its Trustees (“the Trustees”) to recover unpaid employment benefits pursuant to section

502(a)(1) of the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. §

1132(a)(1). In his complaint, Carney alleged that the Trustees arbitrarily and capriciously

denied his June 18, 1996 application for disability pension benefits, benefits to which he

                                             2
was entitled under the Fund’s pension plan (“the Plan”). The Fund appeals the District

Court’s memorandum and order, filed May 24, 2002, in which the Court determined that

the Trustees’ denial of Carney’s application was arbitrary and capricious, and granted

Carney’s motion for summary judgment, awarding him the unpaid disability benefits. An

appeal is also taken from the District Court’s subsequent memorandum and order, filed

August 14, 2002, granting Carney’s motion for attorneys’ fees and costs pursuant to

section 502(g)(1) of ERISA, 29 U.S.C. § 1132(g)(1), and awarding attorney’s fees in the

aggregate amount of $104,062.50 plus costs.1

       We have jurisdiction over these consolidated appeals pursuant to 28 U.S.C. §

1291. Because we agree, after a thorough review of the record, that the Trustees’ denial

of Carney’s disability pension application was arbitrary and capricious, we will affirm the

District Court’s May 24, 2002 order. As to the award of attorneys’ fees, however, we

find that the amount of fees allowed by the District Court was, as to certain items,

excessive. We will, therefore, vacate the August 14, 2002 order and remand for entry of a

judgment awarding fees in accordance with this opinion.

                                             I.

       Because we write primarily for the parties, we recount only those facts essential to

   1
     The actual amount of fees awarded in the August 14, 2002 order was $95,940 to
reflect $8,122.50 already awarded in conjunction with an earlier motion for fees.

                                             3
our decision. Carney joined the International Brotherhood of Electrical Workers Local

Union 98 (“Local 98") in 1962. Local 98 maintained the Plan, which provided retirement

and disability pension benefits to its members. On July 31, 1991, while working as an

electrician, Carney suffered a serious laceration to his right hand, severing an artery and

causing nerve damage. He has not worked as an electrician since the July 1991 accident.

       On June 21, 1996, Carney submitted an application for disability pension benefits

under the Plan. At the time of his application, the Plan provided that a member was

eligible for disability benefits if the member: (1) was determined by the Plan physician to

be “totally and permanently disabled” or qualified for federal social security long-term

disability benefits; (2) was not engaged in regular employment as an electrician; (3) was

at least thirty years old; and (4) met certain vesting requirements. The Plan also imposed

obligations on the Trustees concerning the consideration and resolution of benefits

claims, requiring them to either decide claims within 90 days of their submission, or, if

additional time was required, to notify the applicant of the reason for the delay and decide

the claim within 180 days of its submission.

       At the time of his application, Carney met the second, third and fourth eligibility

requirements for disability benefits – that is, he was over 30 years old, had more than five

years of credited work history, and had not worked as an electrician since 1991. In order

to finalize his application, the Plan Administrator notified Carney that he needed to be

examined by the physician designated by the Plan to make disability determinations, Dr.

                                               4
Michael LeWitt, and instructed Carney to forward relevant medical records to Dr. LeWitt.

Carney subsequently attempted to contact the Plan Administrator to notify him that he

might have difficulty obtaining his voluminous medical records before his examination

and to request assistance in obtaining the records. After the Plan Administrator failed to

respond to Carney’s request for assistance, however, Carney went ahead with the

examination by Dr. LeWitt without the benefit of the medical records concerning his

injury. The same day he examined Carney, August 30, 1996, Dr. LeWitt notified the

Trustees that, in his opinion, Carney was “totally and permanently disabled” under the

Plan definition as a result of the injury to his right hand. Dr. LeWitt’s disability

determination satisfied the only remaining requirement for disability benefits detailed by

the Plan. Thus, as of July 31, 1991, only final approval by the Trustees stood between

Carney and his disability pension benefits.

       The Trustees, however, deferred a decision on Carney’s completed application for

nearly a year, before ultimately denying it on July 3, 1997. Carney did not receive notice

that his application had been deferred until December 20, 1996, when the Plan

Administrator sent him a three-sentence letter which simply notified him, without any

explanation, that his application had been deferred. The Trustees’ depositions, however,

indicate that the Trustees harbored suspicions as to whether Carney was indeed disabled,

despite Dr. LeWitt’s finding of total and permanent disability. Despite their suspicions,

the Trustees never requested that Carney provide any additional information or undergo a

                                              5
further physical examination.

       Instead, the Trustees decided to amend the Plan to modify the eligibility

requirements for disability benefits. Carney received another letter from the Plan

Administrator on May 7, 1997 advising him that the Trustees would not reach a decision

on his application until a “review of Plan procedures regarding disability pension

applications has been finalized.” Two weeks later, at a meeting on May 22, 1997, the

Trustees voted to amend the Plan to require that applicants qualify for federal social

security long-term disability benefits in order to be eligible for disability pension benefits.

At the same meeting, the Trustees voted to deny Carney’s application because it did not

satisfy the new disability eligibility requirement. On July 3, 1997, nearly 13 months after

the date of Carney’s original application, the Plan Administrator notified him that his

application had been denied, and had been denied solely because he had not met the

amended eligibility requirement.

        Carney, pro se, filed a timely administrative appeal with the Trustees, dated

September 2, 1997, inquiring why his application had been deferred for such a long time,

and why the amended eligibility requirement was relevant to his application filed nearly a

year earlier. In a letter dated December 12, 1997, the Trustees denied Carney’s appeal,

simply reiterating his failure to meet the amended eligibility requirement. After

unsuccessfully applying for social security disability benefits in an attempt to comply with

the new requirement, Carney, now with the assistance of counsel, filed a supplemental

                                              6
appeal with the Trustees on November 15, 1999. On June 19, 2000, the Trustees

summarily denied the supplemental appeal due to Carney’s failure to satisfy the amended

eligibility requirement. Again, the Trustees had not attempted to obtain any additional

information about Carney’s medical condition, despite his delivery of the signed release

to obtain his medical records requested by Fund counsel in conjunction with Carney’s

supplemental appeal.

       Carney filed suit against the Plan, the individual Trustees, and the Plan

Administrator on December 11, 2000. His complaint asserted three causes of action: (1)

an ERISA claim that the Trustees breached their fiduciary duty under 29 U.S.C. §

1104(a)(1)(A) in delaying and denying his application; (2) a claim that the Trustees failed

to provide requested Plan documents as required by ERISA in 29 U.S.C. § 1024(b); and

(3) a claim under 29 U.S.C. § 1132(a)(1)(B) for the disability benefits wrongfully denied.

The Complaint sought an injunction requiring the Trustees to grant Carney’s application,

compensatory damages, and reasonable attorneys’ fees under 29 U.S.C. § 1132(g)(1).

       The parties subsequently filed cross-motions for summary judgment. On May 23,

2002, the District Court granted the Trustees’ motion for summary judgment as to the first

and second counts of the complaint – the claims for breach of fiduciary duty and failure to

produce Plan documents – but granted Carney’s motion for summary judgment as to the

third count, holding that the undisputed facts showed that the Trustees had arbitrarily and

capriciously denied Carney’s application for disability benefits under the Plan. The Court

                                             7
ordered the Fund to pay the requested benefits.

       Carney thereafter filed a motion for an award of attorneys’ fees and costs pursuant

to 42 U.S.C. § 502(g)(1), which, as noted above, was granted by the District Court in an

order filed August 14, 2002. In support of the motion, counsel’s time records indicated

that he had spent a total of 512.8 hours on the case, including 174.7 hours preparing for,

taking, and reviewing the depositions of six Trustees and the Plan Administrator, and 44.6

hours preparing Carney’s summary judgment motion. After reviewing the records, the

District Court found that the number of hours claimed by counsel was excessive. The

Court deducted 10 hours from the 44.6 billed for the preparation of the summary

judgment motion, 29.9 hours from the time billed for depositions, and an additional 10.3

hours because some time records lacked specificity, for an overall deduction of 50.2

hours. The Court then multiplied the remaining hours by an hourly rate of $225, resulting

in a fee award of $104,062.50 plus costs, minus $8,122.50 that had been awarded

previously.

                                            II.

       Our review of the District Court’s grant or denial of a motion for summary

judgment is plenary, and we thus apply the same standard as the District Court. Haugh v.

Allstate Ins. Co., 322 F.3d 227, 230 (3d Cir. 2003) . That is, summary judgment is

appropriate only where there is no genuine issue of material fact and the moving party is

                                             8
entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c).

       In the ERISA context, where an employee benefit plan expressly gives the plan

administrator discretion over the interpretation and application of plan provisions, a

district court reviews the administrator’s or fiduciary’s determinations under an arbitrary

and capricious standard. Mitchell v. Eastman Kodak Co., 113 F.3d 433, 438-39 (3d Cir.

1997). The parties do not dispute that the Plan here authorized such discretion, and the

District Court was thus clearly correct to apply the arbitrary and capricious standard of

review to Carney’s claim for benefits. “Under the arbitrary and capricious standard, the

court must defer to the administrator of an employee benefit plan unless the

administrator’s decision is clearly not supported by the evidence in the record or the

administrator has failed to comply with the procedures required by the plan.” Abnathya v.

Hoffman-LaRoche, Inc., 2 F.3d 40, 41 (3d Cir. 1993). This articulation of the standard

comports with ERISA’s express statutory charge that a plan administrator or other

fiduciary “discharge his duties with respect to a plan . . . in accordance with the

documents and instruments governing the plan . . . .” 29 U.S.C. § 1104(a)(1)(D).

       On appeal, the Fund advances three arguments as to why the District Court erred

when it granted Carney’s motion for summary judgment. First, it argues that in reviewing

under the arbitrary and capricious standard, the District Court improperly limited the

record to that evidence that was before the Trustees at the time they denied Carney’s

benefits application and subsequent administrative appeals. Second, it argues that the

                                              9
record evidence does not establish that the Trustees’ handling of Carney’s application was

arbitrary and capricious. And third, it argues that even if the Trustees’ actions were

arbitrary and capricious, the District Court should have remanded the case to the Trustees

for further consideration rather than awarding Carney the requested benefits outright.

Each of these arguments is without merit.

       As an initial matter, the District Court properly limited the record on summary

judgment to the administrative record that was before the Trustees at the time of their

decision. Because the purpose of arbitrary and capricious review is to determine the

reasonableness of the determination at the time it was made, the reviewing court may only

consider evidence that was contained in the record at that time. Mitchell, 113 F.3d at

440; Abnathya, 2 F.3d at 48 n.8. The purpose of so limiting the record is to encourage

communication between plan administrators or fiduciaries and beneficiaries in order that

conflicts can be resolved without resort to litigation. See Vega v. National Life Ins.

Servs., Inc., 188 F.3d 287, 300 (5th Cir. 1999). To allow the introduction of evidence as

to what occurred after the administrative process had been completed would effectively

remove any incentive to conduct an adequate investigation of claims to resolve disputes at

the administrative level – precisely what the Trustees failed to do here.

       Properly limiting the scope of review to the administrative record, the undisputed

evidence demonstrates that the Trustees’ denial of Carney’s application was, indeed,

arbitrary and capricious. The Trustees breached express Plan provisions, as well as the

                                             10
ERISA regulations mandating those provisions, in their handling and ultimate denial of

Carney’s disability benefits application. For starters, the record contains no evidence that

the Trustees attempted to comply with the Plan provisions requiring that an application

for benefits be decided within 90 days of the receipt of the application, or, if additional

time is needed, within a maximum of 180 days if notice is given to the applicant within

90 days explaining the reason for the delay. These time constraints upon benefits

determinations by plan administrators and fiduciaries are expressly mandated by ERISA’s

implementing regulations in 29 C.F.R. § 2560.503-1(f)(1). Here, the Trustees did not

even consider Carney’s application until more than 120 days after Carney submitted his

application and then they failed to provide him with a timely explanation for the delay of

a decision on his application. By the time the Trustees finally denied the application on

July 3, 1997 based on the amended Plan eligibility provision, Carney’s application had

been pending for over a full year – more than twice as long as the maximum time that the

both the Plan and the regulations allow.

       The Trustees not only entirely ignored these procedural requirements imposed by

the Plan itself and by ERISA regulations, they also disregarded the fact that Carney had

satisfied all of the Plan’s requirements for benefits at the time Dr. LeWitt sent his

disability determination to them. Although the Trustees repeatedly contend that Carney

failed to adequately apprise them of his medical condition, they never asked that Carney

be examined by another physician or requested that he submit any medical records. The

                                             11
Trustees’ speculative opinions and suspicions concerning the genuineness of Carney’s

disability were entirely unsupported by any medical evidence in the administrative

record. In sum, the undisputed evidence indicates that the Trustees’ decision to defer and

then to deny Carney’s application was arbitrary and capricious: it violated Plan

provisions, was inconsistent with express ERISA requirements, and was entirely

unsupported by record evidence. See Skretvedt v. E.I. DuPont de Nemours & Co., 268

F.3d 167, 184 (3d Cir. 2001); Mitchell, 113 F.3d 433, 442-43 (3d Cir. 1997).

       Finally, the District Court’s decision to directly award Carney his benefits, rather

than remand the case to the Trustees, was not an abuse of discretion.2 To allow the

Trustees yet another opportunity to substantiate their suspicions after they already had

nearly four years of administrative proceedings, including two administrative appeals,

within which to conduct a further investigation into Carney’s medical condition would

contravene the underlying policies of ERISA and invite similar dilatory behavior by

ERISA fiduciaries. See Zervos v. Verizon New York, Inc., 277 F.3d 635, 648 (2d Cir.

2002); Caldwell v. Life Ins. Co. of North America, 287 F.3d 1276, 1288-89 (10th Cir.

2002). Accordingly, we will affirm the grant of summary judgment to Carney and the

   2
     Although we have not explicitly addressed the appropriate standard of review,
several other courts of appeals have held that a District Court’s choice of remedy in
ERISA benefits denial cases is reviewed for abuse of discretion. See, Cook v. Liberty
Life Assurance Co. of Boston, 320 F.3d , 24 (1st Cir. 2003); Zervos v. Verizon New
York, Inc., 277 F.3d 635, 648 (2d Cir. 2002); Grosz-Salomon v. Paul Revere Life Ins.
Co., 237 F.3d 1154, 1163 (9th Cir. 2001); Halpin v. W.W. Grainger, Inc., 962 F.2d 685,
697 (7th Cir. 1992).

                                             12
award of benefits, the remedy the District Court believed to be appropriate.

                                             III.

       While we will affirm the District Court’s May 23, 2002 order, we will vacate its

August 14, 2002 order awarding Carney attorneys’ fees in the amount of $104,062.50 and

remand for the entry of a judgment awarding fees in accordance with this opinion. We

review the District Court’s decision to award fees, and the reasonableness of the fees

awarded, for abuse of discretion. See 29 U.S.C. § 1132(g)(1) (“In any action brought

under this subchapter . . ., the court in its discretion may allow a reasonable attorney’s fee

and costs of action to either party.”).

        The only error we see in the fee award concerns the District Court’s determination

of the number of hours that Carney’s counsel reasonably expended on the depositions in

this case. The Court’s decision to award fees in the first instance, after carefully

considering the required factors, was clearly not an abuse of discretion. See Ursic v.

Bethlehem Mines, 719 F.2d 670, 673 (3d Cir. 1983). Moreover, the Court considered all

of the time records submitted by Carney’s counsel. And finally, the Court’s

determination that an hourly billable rate of $225 per hour was a reasonable rate for

calculating the lodestar amount was likewise not an abuse of discretion. See Hensley v.

Eckerhart, 461 U.S. 424, 433 (1983).

       But “[h]ours are not ‘reasonably expended’” if they are “excessive, redundant, or

                                             13
otherwise unnecessary.” Id. Here, the time spent by Carney’s counsel preparing for

depositions and reviewing deposition transcripts is clearly excessive. Counsel claimed

reimbursement for a total of 174.7 hours for preparing for, taking, and reviewing the

depositions of six Trustees and the Plan Administrator, despite the fact that these

depositions concerned identical subject matter, all occurred within a six-week period, and

each only lasted between five and seven hours. On average, this translates into

approximately 25 hours claimed per deposition, even though all involved largely the same

documents, questions and events.

       While the District Court correctly recognized that the hours claimed in connection

with these depositions were excessive, its deduction of only 39.9 hours from the total

request of 174.7 hours was, as we see it, an insufficient adjustment to compensate for the

redundancy of deposition preparation and review. See Rode v. Dellarciprete, 892 F.2d

1177, 1183 (3d Cir. 1990). Especially where the lodestar amount is calculated using a

billing rate of $225 per hour to reflect counsel’s status as an ERISA expert, the time

preparing to address the same issues and reviewing similar testimony is, in our view,

unreasonable.

       The District Court has already carefully considered the fee issue, and appropriately

considered it in light of the relevant factors as, of course, have we. We have determined

that it would make little sense to require the District Court to further consider that issue in

light of the fact, and fact in our view it be, that a 25% reduction for the remaining hours

                                              14
claimed in connection with the preparation for and review of the depositions in this case

would give Carney the maximum amount of attorneys’ fees to which we find he could

reasonably be entitled. Accordingly, we will remand so that the District Court can reduce

the 134.8 remaining hours claimed in connection with the depositions by 25% and

otherwise reenter its order of August 14, 2002.

                                            IV.

       For the foregoing reasons, we will affirm the District Court’s May 23, 2002 order

granting Carney’s motion for summary judgment and awarding the requested benefits, but

will vacate the August 14, 2002 order awarding attorneys’ fees and remand for entry of a

judgment consistent with this opinion.

TO THE CLERK OF THE COURT:

       Kindly file the foregoing Opinion.

                                                  /s/ Maryanne Trump Barry
                                                  Circuit Judge