Liberty Life Assurance ordered to pay long term disability benefits but not attorney fees

This case was decided before the United States Supreme Court modified the standards for obtaining attorney fees in ERISA long-term disability lawsuits. To learn more about the criteria for an award of attorney fees visit ERISA disability claimants can receive attorney fees with “some degree of success”. Had this case been decided after the US Supreme Court decision, it is possible that attorney fees may have been awarded in this case. In every ERISA LTD case the award of attorney fees is discretionary with the judge. In this case against Liberty it appears that the claimant’s attorney pissed off the Court to such an extent that they decided not to award attorney fees. It is unfortunate that the lawyer did a goof job in winning portions of the case, but failed at obtaining an award of attorney fees that would have saved his client money.

After successfully winning her claim against Liberty Life Assurance Company of Boston (Liberty Life) at both district and appeals court levels, Theresa Willcox’s disability attorney sought compensation for the attorney’s fees charged Willcox to bring her claim before the Courts. When the District Court denied the application, Willcox’s disability attorney appealed the decision. For a history of this case against Liberty see my previous article at Liberty Mutual’s denial of LTD benefits to woman with back disorder is reversed by Minnesota Court and affirmed by Appellate Court.

The primary reason given by the District Court for denying the disability attorney compensation hung on the reality that despite the fact that the Court found Liberty Life had abused its discretion, there had been enough contradictory evidence in the record to clear the disability insurance company of charges it had acted maliciously.

Court finds disability attorney’s fees are excessive.

The Court also found that the fees Willcox’s disability attorney was seeking to collect were “clearly excessive.” The Court noted that Willcox’s disability insurance attorney had engaged in a “pattern of inflammatory and vitriolic arguments.” The District Court concluded that his charges it was Liberty Life’s fault that so much time and resources had gone into the disability lawsuit were unfounded.

Court considers basis for awarding disability attorney fees.

In order to determine whether the District Court had made the correct decision, the Court of Appeals considered whether the District Court had applied the following five factors to reach the decision.

1. To what degree was Liberty Life guilty of culpability or bad faith?
2. Was Liberty Life able to pay attorneys’ fees?
3. Would awarding attorneys’ fees against Liberty Life deter other disability insurance companies acting under similar circumstances?
4. Was Willcox’s claim seeking to benefit all the participants and beneficiaries of Liberty Life’s ERISA plan or did the claim resolve a significant legal question regarding ERISA itself?
5. What was the relative merits of Willcox’s position when compared to Liberty Life’s position?

These five factors are known as the Westerhaus factors – named after the 1984 Lawrence v. Westerhaus opinion in which the factors first appeared. The Court has been using these five factors to evaluate when to award attorney fees under ERISA.

The Court of Appeals found that the District Court had applied these five factors properly. While it is unnecessary for all five factors to apply, the Court has generally found more than one factor necessary before it will award attorney fees. In Willcox’s case, only one factor clearly weighed in favor of awarding attorney’s fees – Liberty Life’s ability to pay.

Disability attorney seeks recognition of bad faith on part of disability insurance plan.

The District Court did not find the disability insurance plan culpable or guilty of bad faith. In his appeal of this finding, Willcox’s long-term disability attorney argued that Liberty Life should have been found culpable for its abuse of discretion. By conducting a cursory review of her benefits claim, the disability attorney argued that Liberty Life had acted in bad faith.

The Court of Appeals disagreed. Based on Fletcher-Merrit v. NorAm Energy Corp. and Eisenrich v. Minneapolis Retail Meat Cutters & Food Handlers Pension Plan, Liberty Life could not be held culpable when there was enough evidence to suggest that Liberty Life’s denial was not without some merit.

Willcox’s claim only sought personal benefits, notwithstanding her disability attorney’s claim that her lawsuit was filed to indirectly motivate Liberty Life to conduct more thorough investigations in the future. The Court of Appeals sided with the District Court’s evaluation of this matter as well. Willcox was not directly seeking to benefit other participants in the disability insurance plan, thus this factor weighed against approving compensation for attorney’s fees.

While her disability attorney argued that awarding disability attorney’s fees would discourage long-term disability insurance plans from performing surface claims review, both Courts felt that it would not have much impact, if any, on other disability insurance plans. Siding with the District Court, the Court of Appeals found that the disability attorney had exacerbated the situation by his handling of the lawsuit.

Court finds disability attorney prolonged ERISA litigation process.

After reviewing all the evidence the Court of Appeals upheld the finding of the District Court that Willcox’s disability attorney had “done more to unreasonably” prolong the ERISA litigation “than any litigating position Liberty Life took.” The Court found that it preferred to deter long-term disability attorneys from clogging the Court system with drawn out ERISA claims.

Willcox’s disability attorney argued that the merits of her case were so strongly on her side, that attorney’s fees should be paid on this one factor alone. The Court of Appeals found otherwise. The merits of Willcox’s position was only slightly stronger than Liberty Life’s, but not enough to tip the scales toward payment of her disability attorney’s fees. Liberty Life had made a decision on evidence that did present some merit.

Court finds that disability attorney is not entitled to recovery of fees.

After considering Willcox’s case carefully, the Court of Appeals reached a conclusion. The District Court had not made a “clear error in judgment” as Willcox’s disability attorney claimed. Rather, because the only factor that weighed clearly for awarding attorney’s fees was Liberty Life’s ability to pay, the Court of Appeals upheld the District Court’s decision.

This case highlights one vital factor that a disability attorney must consider when representing a client in an ERISA claim. The Court felt this disability attorney had caused the whole litigation process to linger in the Courts. The decision to deny attorney’s fees fails to give specific details, but it may be inferred from reading the decision that the disability attorney “unreasonably multiplied” the proceedings in some way.

It is important that a disability attorney expend time and resources efficiently. The Court is well aware of what is necessary to prepare a proper litigation, yet is also sensitive to things that lawyers may do that are unnecessary and take up more time than needed. If it appears that an attorney is “milking” a claim for everything he/she can get, the Court is less favorable to awarding attorney’s fees, even if it has sided with the claimant, as it did in Willcox’s case. The judge always has the final decision on awarding attorney fees therefore there is no guarantee that attorney fees will be awarded in every case.