Broadspire ordered to pay disability insurance benefits but not attorney fees

If Judge Michael J. Reagan is beginning to tire of considering the case between Lisa Pakovich and her former employer’s long-term disability plan, he may have good reason to. He has had to listen to arguments from both Pakovich’s long-term disability attorneys and the Verizon Long-Term Disability Plan (Plan) attorneys at least four times in less than a year. He’s not the first judge to consider Pakovich’s claim. Pakovich v. Broadspire Services, Inc., 535 F. 3d has been cited in a number of Seventh Circuit decisions.

On March 24, 2010, Judge Reagan entered his ruling granting Pakovich’s motion for summary judgment. In response, Packovich’s disability attorneys filed a motion for attorney’s fees. Judge Reagan considered the motion to collect these fees on April 22, 2010. In his decision, he first breaks down the legal standard that guided his decision. Then he compares Pakovich’s motion against that standard.

Judge establishes the legal framework for determining whether disability attorneys should receive attorney’s fees.

In order to have the right to attorney’s fees, the disability attorney applying for compensation must have won a substantial part of the litigation. Then further matters must be considered. When a disability attorney wins an ERISA claim for his/her client, it by no means guarantees that the court will award attorneys fees. The presumption that such fees are appropriate is tempered by whether the disability insurance company had a justifiable position that was taken in good faith.

When the Court does decide that compensation for attorney’s fees is reasonable, the court expects the disability insurance attorney(s) to only include hours that were productively spent toward successful litigation efforts. Any hours spent litigating unsuccessful lawsuits are not billable. The Court expects that hours billed must be itemized sufficiently. This allows the Court to recognize when excessive, redundant or otherwise unnecessary charges have been included. The Court also requires sufficient details so the judge can determine whether the work performed is clearly connected to the litigation.

The Court also expects a disability attorney seeking attorney’s fees to use a reasonable hourly rate that compares with a rate used by other lawyers within the local market. The court expects the person applying for attorney’s fees, to provide evidence that supports the local market rate. Then if the opposing side believes that a lower rate should be awarded, it must present evidence for the court to consider.

Once the basic values of hourly rate and reasonable time expenditures have been established, the Court can adjust the final settlement based on 12 factors. They may work alone or in conjunction with each other.

1. The time and labor involved in comparison to the complexity of the case.
2. The novelty and difficulty of the questions brought before the Court.
3. The skill the attorney had to possess in order to provide acceptable legal services.
4. The inability of the attorney to accept other cases in order to handle the claim.
5. The customary fee of other attorneys practicing in the same specialty.
6. Whether the attorney charges a fixed fee or contingent fees.
7. Time limitations imposed by the client or the circumstances
8. The amount of money involved in settling the claim and the results obtained.
9. The experience, reputation, and ability of the disability attorney(s).
10. The ‘undesirability’ of the disability benefits case.
11. The nature and length of the professional relationship with the client.
12. Awards paid by other courts in similar cases.

Court determines that the prevailing disability attorney has a right to attorney’s fees.

Pakovich not only prevailed, but the Court sided overwhelmingly in her favor. Judge Reagan, having seen the actions of the Verizon Plan for almost a year, had reason to question the good faith of the organization. Her disability attorneys had represented her five times since June 22, 2005, yet it took the disability insurance plan more than seven months to determine whether they were going to pay her benefits or not after the Court of Appeals remanded her case back to Verizon’s Long-term Disability Plan for consideration under the “any occupation” provisions of the Plan. The Court found the Plan’s opposition to paying attorney’s fees failed to meet the ERISA standard of good faith. An award of attorney’s fees under ERISA was clearly warranted.

Court denies motion for disability attorney fees and costs for two reasons.

Unfortunately for Pakovich, the Seventh Circuit had already denied a motion for fees and costs incurred since the Court order entered on November 7, 2006. Pakovich’s disability attorney claimed that the appellate court had made a premature decision when it denied the motion for a reasonable settlement for the fees incurred during the hearing and rehearing process.

While the Court had originally denied the motion without explanation, after the appeal the Court affirmed the decision because the Court did not find that Broadspire Services/Verizon Plan had set out to harass Pakovich. Rather the disability insurance provider was defending a reasonable position. When both an equal and a higher court had already said no to a payout of attorney’s fees, Judge Reagan could not justify a decision that contradicted the previous ruling.

In addition to the prior Court ruling on this issue, Judge Reagan found another serious issue with Pakovich’s request for attorney’s fees. The disability attorney made a major blunder, which may have secured Judge Reagan’s unwillingness to reverse the ruling on attorney’s fees from the prior Court decisions. He failed to provide acceptable documentation as mandated under ERISA.

He did not provide receipts, invoices or vouchers to verify the amounts he was claiming in the motion. He did not provide the mandatory documentation to support an hourly rate within the local economy for typical disability attorney fees. He didn’t provide a reasonable breakdown of the hours worked preparing Pakovich’s disability claim or representing her. None of the information that would have assisted Judge Reagan in assessing the claim for attorney’s fees against the 12 guidelines were available for the Court to consider.

Instead, the disability attorney asked the Court to accept a single invoice with only two invoice items on it – one item showing his own fees and the other fees for “SGS”. The Court could only guess that the disability attorney felt that something around $300 an hour was appropriate for himself, and $90 an hour was appropriate for SGS. Having failed to provide the Court with any affidavits supporting the reasonableness of these fees, the Court had no option but to deny the motion for an award of attorney’s fees connected with bringing Pakovich’s case before the Courts for a fourth time.

While there is no way to know if Judge Reagan would have reconsidered his decision if Pakovich’s disability attorney had presented all of the required documentation for a favorable ERISA attorney’s fee decision, there was evidence in his decision that suggests he would have been willing to apply the ERISA guidelines to the situation.

Judge Reagan observed the fact that Pakovich had found herself in court yet again on March 24, 2010. In his eyes, this demonstrated that the Verizon Plan was not acting in good faith on the July 29, 2009 decision of the Court ordering the Plan to re-evaluate Pakovich’s claim under the “any occupation” terms of the Plan. He found that taking seven months to evaluate a claim that had been in the Courts for four years already seemed excessive.

It is a shame that this disability attorney did so much great work on behalf of his client yet failed to receive an award of attorney fees. Hopefully under the new US Supreme Court standard for obtaining attorney fees it will be easier for disability claimants to receive attorney fee awards. See our recent article discussing award of attorney fees.