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Attorney's Fees Awarded in § 502(a)(3) Action for Reimbursement of Plan Assets

ERISA and Life Insurance News
(June 6, 2013)

AirTran sued Elem and her personal injury attorney under section 502(a)(3) of ERISA for reimbursement of more than $131,000 in self-funded health plan benefits paid by AirTran. The benefits were for medical treatment expenses due to injuries Elem sustained in a motor vehicle accident.

Elem filed a personal injury lawsuit against the responsible driver. Despite the fact that AirTran provided Elem and her attorney with notice of the plan’s subrogation and reimbursement rights, the lawsuit was settled and the settlement funds were distributed to Elem and her attorney without reimbursing the plan.

The personal injury lawsuit settled for $500,000, but the attorney told AirTran that the case had settled for only $25,000, and asked AirTran to accept $4,500 to resolve the reimbursement claim. AirTran discovered the true amount of the settlement, and invoked section 502(a)(3) to recover the full amount of benefits from the settlement funds in the possession of Elem and the attorney, along with an award of attorney’s fees and costs under section 502(g)(1) of ERISA.

The court granted summary judgment to AirTran, holding that it was entitled to full reimbursement from the settlement fund under Zurich Am. Ins. Co. v. O’Hara, 604 F.3d 1232 (11th Cir. 2010). The court took note of the Supreme Court’s grant of certiorari in U.S. Airways v. McCutchen, 663 F.3d 671 (3d Cir. 2011), in which the Third Circuit disagreed with O’Hara, but elected to “proceed under existing Eleventh Circuit precedent.”

The court awarded attorney’s fees to AirTran against Elem’s personal injury attorney and his law firm, finding that the attorney “went to substantial lengths to avoid disclosing” $475,000 of the settlement, and further, that his arguments were contradicted by controlling Eleventh Circuit case law. The court ordered the parties to submit briefs on the amount of attorney’s fees to be awarded. AirTran requested $145,723 in attorney’s fees, arguing that all five of the factors to be considered by the court in awarding fees were satisfied. The “nuclei of concerns” include “(1) the degree of the opposing party’s culpability or bad faith; (2) the ability of the opposing party to satisfy an award of attorney fees; (3) whether an award of attorney fees against the opposing party would deter other persons acting under similar circumstances; (4) whether the party requesting attorney 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 each party’s position.” Wright v. Hanna Steel Corp., 270 F.3d 1336, 1344 (11th Cir. 2001).

The court concluded that the attorney’s attempted concealment of $475,000 and his arguments purporting to “justify [this] deceit” were in “bad faith,” and that the arguments were “wholly unreasonable.” The court rejected objections to the fee request, and found that the factors of bad faith, deterrence, ability to satisfy the award, and the relative merits of the parties’ position justified an award of $145,723 in attorney’s fees and litigation expenses of $3,692.

Click here to view the full June 2013 Edition of the ERISA and Life Insurance News.

H. Sanders Carter
T (404) 962-1015
F (404) 962-1220
Kenton J. Coppage
T (404) 962-1065
F (404) 962-1256

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