The topic of attorneys’ fees has long been of interest to insurance lawyers and clients alike. Recently, the courts have grappled with issues such as: When are attorneys’ fees recoverable? What types of billing practices are reasonable? What are reasonable hourly rates? Attorneys want the assurance that the fees they charge will be deemed “reasonable,” and defendants (the insurance companies) want to know when they can raise defenses to the amount of an attorneys’ fees they may be expected to pay. In this article, we will consider a recent case that has helped bring some clarity to the issue of “reasonable” fees for legal work. Robert J. McKennon of McKennon Law Group PC acted as an expert in this case as to reasonable hourly rates. The court adopted his testimony in full.
In a recent decision by the U.S. District Court for the Central District of California, Harlow v. Metropolitan Life Insurance Company, 2019 WL 2265136, the Plaintiff successfully challenged the insurer’s decision to terminate her long-term disability payments. She then moved for attorney’s fees, with each side submitting multiple declarations and exhibits for or against specific amounts and practices. There was no question about the court’s discretionary authority to award reasonable attorneys’ fees in an ERISA case, and case law holds that a court must initially determine whether the plaintiff has “achieved some degree of success on the merits.” Simonia v. Glendale Nissan/Infinity Disability Plan, 608 F.3d 1118, 1119 (9th Cir. 2010). That success must go beyond a victory on mere procedural issues or some “trivial” matter. Beyond this test, a court must consider the five factors derived from Hummell v. S. E. Rykoff & Co., 634 F.2d 446, 452 (9th Cir. 1980). These “Hummell factors” are as follows:
(1) the degree of the opposing parties’ culpability or bad faith;
(2) the ability of the opposing parties to satisfy an award of fees;
(3) whether an award of fees against the opposing parties would deter others from acting under similar circumstances;
(4) whether the parties requesting fees sought to benefit all participants and beneficiaries of an ERISA plan or to resolve a significant legal question regarding ERISA; and
(5) the relative merits of the parties’ positions.
The Harlow court ruled that the Plaintiff was entitled to reasonable attorney’s fees, pointing out that MetLife itself made no argument denying the Plaintiff had “achieved success on the merits of her action,” nor cited any “special circumstances” that might have precluded the fee demand. Moreover, the Hummell factors only apply when the merits of the Plaintiff’s claim are still under serious consideration.
The court next addressed what makes an attorney’s fee “reasonable.” A reasonable fee is determined by means of “a hybrid lodestar/multiplier approach.” McElwaine v. US West, Inc., 176 F.3d 1167, 1173 (9th Cir. 1999) (citations omitted). A lodestar amount is determined by “multiplying the number of hours reasonably expended by each attorney’s reasonable hourly rate.” Id. This determination notwithstanding, a court would be within its rights to disallow “excessive, redundant, or otherwise unnecessary” claims. Id. When—as in Harlow—a Plaintiff seeks an award of $184,750 for attorneys’ fees, the issue of “reasonableness” deserves scrutiny. The court first cited case law in favor of looking to “the prevailing market rate for similar services ‘by lawyers of reasonable comparable skill, experience, and reputation.’” Mardirossian v. Guardian Life Ins. Co. of Am., 457 F.Supp.2d 1038 (C.D. Cal. 2006), citing Blum v. Stenson, 465 U.S. 886, 895 n.11 (1984). The Plaintiff’s counsel charged $400 per hour, a figure she reached upon making partner, while her fellow counsel billed at $700 per hour. The court found these sums reasonable due to the respective attorneys’ long experience with ERISA claims. In support of the Plaintiff’s counsel on this matter of relevant experience, Robert J. McKennon, managing shareholder of The McKennon Law Group PC, submitted evidence via testimony based on his more than thirty years in insurance law and ERISA law, especially in the areas of life, disability and health.
In opposition to MetLife’s assertion that the fees quoted run contrary to “policy considerations” and ERISA’s purpose “to provide inexpensive, expeditious resolution to disputes concerning qualifying employee benefit plans” (citations omitted), the court pointed to the Ninth Circuit’s determination that courts should not arrive at an appropriate rate “by reference to the rates actually charged the prevailing party” but instead “by reference to the fees that private attorneys of an ability and reputation comparable to that of prevailing counsel charge their paying clients for legal work of similar complexity.” Welch v. Metro. Life Ins. Co., 480 F.3d 942, 947 (9th Cir. 2007). With regard to the claim made by MetLife about ERISA’s public policy imperative, the court again cited the Ninth Circuit, which determined that among ERISA’s goals were “protect[ing] employee rights” and “secur[ing] access to federal courts.” Smith v. CMTA-IAM Pension Trust, 746 F.2d 587, 589 (9th Cir. 1984). The court found that allowing “reasonable” attorneys’ fees would in fact help clients gain such access. If attorneys cannot charge the prevailing rate, they might be unwilling to take on ERISA clients, which would effectively deprive such clients of access to the courts.
MetLife also made a number of unavailing arguments against the sums charged by the Plaintiff’s counsel. MetLife argued that the hours billed were excessive, duplicative, overly reliant on prefabricated “boilerplate” language, prone to non-itemized block-billing, and inclusive of inappropriate administrative or merely clerical labor. The court’s responses to these concerns testified to the complexity and dynamic quality of the labor involved in lawyering, and affirmed the awarding of reasonable attorneys’ fees to be in line with ERISA’s overarching purpose: providing plaintiffs with access to the federal court system in their attempts to recover benefits to which they believe they are entitled. With respect to supposedly “duplicative” hours billed, the court cited case law: “a lot of legal work product will grow stale; a competent lawyer won’t rely on last year’s, or even last month’s, research.” Moreno v. City of Sacramento, 534 F.3d 1106, 1112 (9th Cir. 2008). Essentially, the court inferred that since the law itself changes, so must an attorney’s research undergo diligent updating. As for the tendency of several lawyers to work on the same set of tasks, while the court acknowledged it as a genuine concern, it found that where there is appropriate division of labor among the attorneys—in their example from the present case, one attorney drafts a document while others review it carefully—there is little need to worry about the reasonableness of work thus accomplished. The court deducted only $2,100 from the total of the Plaintiff’s counsel’s fees, stemming from a charge of 7.8 hours for half a day’s mediation work. With regard to the issue of “boilerplate” language in legal pleadings and other documents, the court accepted the view of the Plaintiff’s counsel that not using such language would only have occupied more of their time: “the time spent preparing this Motion would have been substantially greater had they not efficiently re-used past efforts.” Finally, the court did not find that the Plaintiff’s counsel’s block-billing reached the point where a reviewer could not tell “how much time was spent on particular activities,” and neither did it accept MetLife’s argument that preparing subpoenas using partially recycled language, or preparing exhibits, was too “clerical” to call for an attorney’s full hourly fee.
In summary, the court’s decision prevents defendant insurers from too easily challenging the fees claimed by counsel in their efforts to help ERISA clients recover duly owed long-term disability benefits.
