Court Opinion

ID: 10632
Source: CourtListenerOpinion
Date Created: 2010-04-25 05:55:50+00
Date Added: 2024-06-11T15:04:36.390793
License: Public Domain

IN THE UNITED STATES COURT OF APPEALS

                            FOR THE FIFTH CIRCUIT
                               _______________

                                  No. 96-40154
                               Summary Calendar
                                _______________

            THE TRANSITIONAL LEARNING CENTER AT GALVESTON,

                                                         Plaintiff-Appellee,

                                     VERSUS

                  METROPOLITAN LIFE INSURANCE COMPANY,

                                                         Defendant-Appellant.

                         _________________________

             Appeal from the United States District Court
                  for the Southern District of Texas
                                (G-95-17)
                       _________________________
                            October 19, 1996

Before SMITH, DUHÉ, and BARKSDALE, Circuit Judges.

JERRY E. SMITH, Circuit Judge:*

      Metropolitan Life Insurance Company (“MetLife”) appeals the

award of attorneys’ fees and prejudgment interest to the Transi-

tional Learning Community at Galveston (“TLC”) under the Employee

Retirement    Income    Security     Act   of   1974   (“ERISA”),     29   U.S.C.

§§ 1001-1461 (West 1985 & Supp. 1995).                 We affirm in part and

      *
         Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion
should not be published and is not precedent except under the limited circumstances
set forth in 5TH CIR. R. 47.5.4.
vacate and remand in part.

                                I.

     TLC sued MetLife in state court in November 1994, alleging

that MetLife had failed to reimburse TLC for various medical

expenses incurred in connection with its treatment of Angela

Sibley, a dependent of an insured under a MetLife medical insurance

policy.   MetLife removed this action to federal court on the same

day that the state court, after MetLife had failed to appear,

entered a default judgment on TLC’s claims.     The district court

later reformed the state court judgment to reflect the parties’

subsequent agreement to the proper amount of monies owed.     Upon

motion, the court awarded TLC attorneys’ fees and pre- and post-

judgment interest on the amount of the reformed judgment.

     We address first MetLife’s argument that this case should be

dismissed because TLC failed to exhaust its administrative remedies

under the ERISA-regulated plan prior to filing the instant action.

According to MetLife, the disposition of the instant claim had been

held up for over two years because TLC failed to provide a

completed Statement of Continued Disability from the plan adminis-

trator. Once TLC forwarded the completed statement to MetLife, the

claim was settled promptly.

     Although we agree with MetLife that TLC may have failed to

exhaust its administrative remedies, we refuse to dismiss the

instant action, as MetLife did not raise this objection timely.

                                 2
When TLC filed its original action, MetLife had ample opportunity

to raise its exhaustion defense, and we will not reward it for

failing even to appear in that action.   That MetLife chose not to

answer TLC’s complaint in state court, but rather compelled the

state court to enter a default judgment against it, constituted

waiver of its right to assert an exhaustion defense.   The district

court found, properly, that MetLife did not proffer any reasonable

justification for its failure to appear in the state court action,

and thus we do not believe that it is prejudiced unduly by its

failure to assert its defenses timely.

     MetLife correctly asserts that we have applied the exhaustion

doctrine in suits arising under ERISA, see Medina v. Anthem Life

Ins. Co., 983 F.2d 29, 33 (5th Cir.), cert. denied, 510 U.S. 816

(1993), but we have never construed the doctrine strictly as a

jurisdictional bar, see id. (noting that plaintiff did not exhaust

her remedies because she had never filed a claim for the disputed

sum); Simmons v. Willcox, 911 F.2d 1077, 1081 (5th Cir. 1990)

(noting that plaintiff did not exhaust her remedies because she had

failed to file any claim for benefits with the insurer); Meza v.

General Battery Corp., 908 F.2d 1262, 1279 (5th Cir. 1990)(noting

that the plaintiff did not exhaust her remedies because she never

requested plan information or applied for benefits prior to filing

suit). Rather, we have held that sound public policy underlies the

application of the doctrine to ERISA, see id. at 1279, and the same

                                3
applies in the instant case:         MetLife could have facilitated the

prompt and efficient disposition of an ERISA claim by appearing in

state court and raising its exhaustion defense in that forum.

                                     II.

     MetLife next challenges the award of attorneys’ fees.                  We

review this for abuse of discretion.          See Ramsey v. Colonial Life

Ins. Co. of Am., 12 F.3d 472, 480 (5th Cir. 1994).

     After reviewing the five factors1 used in this circuit, the

district court concluded that

     [t]he record fails to show that any of the first four
     factors listed in Bowen weigh significantly in favor of
     either granting or denying attorneys’ fees. Nonetheless,
     consideration of the final factor, viewed in light of
     Defendant’s initial refusal to pay Plaintiff the owing
     funds and subsequent failure to contest liability in a
     proper or reasonable manner, persuades this Court to
     award Plaintiff the requested attorneys’ fees.

913 F.     Supp.   504,   506-07   (S.D.   Tex.   1996)   (emphasis   added).

MetLife interprets these sentences “clearly [to] state[]” that the

court reached its decision “solely on the basis of the relative

     1
         The five factors are:

     (1) the degree of the opposing parties’ culpability or bad faith;
     (2) the ability of the opposing parties to satisfy an award of
     attorneys’ fees; (3) whether an award of attorneys’ fees would deter
     other persons from acting under similar circumstances; (4) whether
     the parties requesting attorneys’ fees sought to benefit all
     participants and beneficiaries of an ERISA plan or to resolve a
     significant legal question regarding ERISA itself; and (5) the
     relative merits of the parties’ positions.

Iron Workers Local No. 272 v. Bowen, 624 F.2d 1255, 1266 (5th Cir. 1980).

                                      4
merits of the parties’ positions.”     MetLife next protests that,

because the court failed to assess the merits properly, the award

should be reversed.

     We disagree.    As a preliminary matter, the district court did

not state expressly that the first four factors were inapposite to

the decision, but rather that none on its own significantly cut in

favor of an award.

     “[I]n light of Defendant’s initial refusal to pay Plaintiff

the owing funds and subsequent failure to contest liability in a

proper or reasonable manner,” 913 F. Supp. at 506-07, the court

made plain that MetLife’s culpability or bad faith (the first Bowen

factor) became significant when considered along with the merits.

That the court could have been more lucid in its explication of the

Bowen factors is not reversible error as long as such factors guide

the decision-making process.   See Harms v. Cavenham Forest Indus.,

984 F.2d 686, 694 (5th Cir.)(“No one of these factors is necessar-

ily decisive, and some may not be apropos in a given case, but

together they are the nuclei of concerns that a court should

address in applying section 502(g).”)(citation omitted), cert.

denied, 510 U.S. 944 (1993).

     After reviewing the record with proper deference to the

district court’s findings, as required under our limited standard

of review, we disagree with MetLife that the court abused its

                                  5
discretion in awarding fees.2          The district court properly could

have found that MetLife’s refusal to reimburse TLC for its expenses

more than two years after it incurred such expenses (settlement of

which expenses was made promptly after TLC’s filing of the instant

action), coupled with its failure to appear in state court, and its

continued contest of jurisdiction based on an exhaustion defense

that could have been raised properly in the state court proceeding,

supported an award of fees based upon Bowen factors (1) and (5).3

                                      III.

      Finally, MetLife challenges the award and amount of prejudg-

ment interest.     We review for abuse of discretion.          See In re Tex.

Gen. Petroleum Corp., 52 F.3d 1330, 1339 (5th Cir. 1995).

      MetLife’s first argumentSSthat the district court erred in

granting any prejudgment interestSSis without merit.                   We have

recognized previously that ERISA does not preclude the district

court from awarding attorneys’ fees and that an award of prejudg-

      2
        We decline TLC’s invitation to award attorneys’ fees for its work
incurred as part of this appeal. Although we do not believe the district court
abused its discretion in so awarding fees, we do not, on independent review of
the recordSSi.e., where we are not bound by the deferential standard of review
on appealSSfind that the Bowen factors counsel in favor of such an award.
      3
        MetLife’s citations to Ramsey, Harms, and Hogan v. Kraft Foods, 969 F.2d
142, 146 (5th Cir. 1992), are inapposite. In each of these cases, we noted that
where there is a complete lack of any bad faith or culpability on the part of the
defendant, the deterrent purpose that the third Bowen factor purports to serve
is inapplicable. Ramsey, 12 F.3d at 480; Harms, 984 F.2d at 694 n.12; Hogan,
969 F.2d at 146. As our discussion above notes, however, the record in the
instant case reflects such evidence of bad faith or culpability.

                                       6
ment interest under ERISA furthers the congressional purposes of

the statute.    See Hansen v. Continental Ins. Co., 940 F.2d 971, 984

(5th Cir. 1991). Hence, the decision that fees were appropriate in

the instant case is not an abuse of discretion.4

      MetLife argues correctly, however, that under Texas law, which

we consult for guidance in assessing prejudgment interest in ERISA

claims, see Hansen, 940 F.2d at 984, prejudgment interest accrues

only from the thirtieth day following the date upon which sums

outstanding become “due and payable.”           See TEX. REV. CIV. STAT. ANN.

art. 5069-1.03 (Vernon 1987).         The district court failed to make a

finding of the due and payable date for the outstanding charges,

and we are unable to discern such from the record.             Thus, although

we affirm the award of prejudgment interest, we vacate the judgment

and remand for a determination of when MetLife’s obligation to pay

TLC for the outstanding claims became due and payable.

      AFFIRMED in part, VACATED and REMANDED in part.

      4
        MetLife misreads Dependahl v. Falstaff Brewing Corp., 653 F.2d 1208, 1219
(8th Cir.), cert. denied, 454 U.S. 968 (1981), to disallow attorneys’ fees where
the defendant has not had use of the money during the course of the proceedings.
Dependahl does not so require defendant’s use of the money, but rather notes that
such a factor counsels in favor of a court’s award of “appropriate equitable
relief” under ERISA. Id.

                                       7