COFFEY, Circuit Judge.
The plaintiff, Billy Hooper,
In 1990, Billy Hooper, an employee of the defendant, Demco, was diagnosed with multiple myeloma,
The Demco Health Plan
Demco, has a self-funded health plan (the "Demco Plan") overseen by an independent professional claims administrator, the Traveler's Plan Administrator ("TPA"). TPA's job is to evaluate each case presented to the plan and determine whether the proposed treatment is covered by provisions in the Demco plan. TPA had approved payment of all of Mr. Hooper's cancer treatments and procedures up to the request for approval of and reimbursement for the HDC-ABMT.
The Demco plan provided in relevant part:
Under the clear terms of the Demco plan, TPA could not authorize funds for any procedure that was "experimental" or "investigative." TPA contacted UMAC, Inc. ("UMAC"), an independent medical review organization, to determine whether HDC-ABMT was investigative or experimental and thus not covered under the plan. UMAC advised that only a small number of multiple myeloma patients had been treated with bone marrow transplant and high-dose chemotherapy and further advised that the procedure was not in widespread use,
TPA sought a second opinion from the Medical Review Institute of America ("MRIA"), another independent medical review organization. MRIA found, after a review of the current medical writing and research data available, that HDC-ABMT was not a generally accepted treatment for multiple myeloma. MRIA further determined that there was insufficient documentation of
On May 25, 1993, TPA sent written notification to Hooper stating that based on the independent reviews of both UMAC and MRIA, the Demco Plan would not pay for HDC-ABMT because TPA concluded that the HDC-ABMT treatment was still considered to be experimental and in the investigative stage of development.
One month later, in a letter dated June 23, 1993, Hooper's physician, Dr. Longo, requested a re-review of TPA's decision. Dr. Longo provided TPA with various medical literature discussing the most current studies based on the usage of HDC-ABMT and requested that TPA reconsider its decision in light of these new studies. After review, TPA concluded that the literature failed to support Hooper's claim that HDC-ABMT was generally accepted as a standard medical treatment, but nonetheless, TPA turned the claim and the new information over to UMAC for its evaluation.
By letter dated July 21, 1993, UMAC again advised TPA that the use of HDC-ABMT was still considered investigational. On August 4, 1993, TPA advised Mr. Hooper and Dr. Longo that re-review of the request for funding had been rejected as HDC-ABMT was not a covered treatment for multiple myeloma under the Demco plan.
At this time, Hooper commenced this ERISA suit in the Western District of Wisconsin challenging the denial of coverage. Demco defended its actions relying on the terms of the contract as well as certain medical literature and expert opinions concerning the status of HDC-ABMT. At the same time, Demco spearheaded a charitable fund-raising effort to pay for Hooper's treatment.
Evidence Regarding the Status of HDC-ABMT
After the suit was filed, Demco consulted with Dr. Raymond B. Weiss, Chief of Medical Oncology at the renowned Walter Reed Medical Center in Washington, D.C. Dr. Weiss informed Demco that HDC-ABMT for multiple myeloma was not generally accepted as a standard medical treatment. In an effort to obtain treatment for Hooper, Dr. Weiss attempted to enroll Hooper in an HDC-ABMT study at the National Institute of Health, but was unsuccessful.
The record, developed in the pre-settlement discovery, contains opinions by various recognized cancer experts including the plaintiff's own oncologist, Dr. Philip Greipp, as to the effectiveness of HDC-ABMT. In his deposition, Dr. Greipp himself characterized the treatment as "very controversial." Dr. Greipp testified that HDC-ABMT was still in its investigative stages:
Greipp deposition at p. 58, (emphasis added).
Hooper's suit against Demco was settled on August 30, 1993, after a number of organizations (see footnote 7) agreed to underwrite and, in effect, cover Hooper's expenses for his treatment. Hooper underwent HDC-ABMT treatment very shortly thereafter, but the treatment was ineffective and Hooper passed away before this appeal.
The question left unresolved after settlement was whether Hooper's estate was entitled to attorney's fees. In the district court's order dismissing the case in light of the settlement agreement, the judge scheduled a hearing to determine if the plaintiff was entitled to attorney's fees as provided for under ERISA § 502(g)(1). On October 29, 1993, the trial court turned down the plaintiff's request for attorney's fees because he was of the opinion that Demco acted in good faith in denying the claim by classifying the HDC-ABMT treatment as investigative and experimental — their position being substantially justified in light of the evidence in the record. In addition, the court found that based on the evidence concerning HDC-ABMT, the defendant's action could not be classified as having been taken for the purposes of harassing the plaintiff. In regard to the issue of whether the treatment was experimental or investigative, the court stated, "[e]vidence in the record, however, suggests that the procedure may be experimental and, accordingly, not covered by the defendant's health plan." The district court added that Demco's refusal to pay was not vexatious.
Plaintiff claims on appeal that he is entitled to attorney's fees as he claims he was the prevailing party in the underlying litigation. Plaintiff argues that the fact that the case was settled, in and of itself, proves that defendant's position was not justified. Defendant argues that its help in securing alternative funding from a number of people and organizations unrelated to the parties in the lawsuit, did not amount to a concession of liability on behalf of Demco. Demco explains its actions were nothing but a charitable act meant to help a fellow human being, Billy Hooper, obtain funds for his treatment. Since the settlement was not meant as an admission of liability, the defendant maintains its position that HDC-ABMT was experimental and not covered under the Demco plan.
The issue for review is whether the district court abused its discretion when it denied plaintiff's petition for attorney's fees because it found that the defendant's position was substantially justified. We, however, recognize that prior to determining if the defendant's position was substantially justified, we must determine whether the plaintiff is truly a prevailing party in light of the settlement in this case.
Hooper's suit was brought pursuant to the Employee Retirement Income Security Act of 1974, which provided the district court with exclusive jurisdiction pursuant to 29 U.S.C. § 1132(e)(2). We note that the primary purpose of ERISA, to protect the participants in employee benefit plans, is achieved by "establishing standards of conduct, responsibility, and obligations for fiduciaries of employment benefit plans, and by providing for appropriate remedies, sanctions, and ready access to the federal courts." ERISA § 2(b), 29 U.S.C. § 1001(b). To encourage aggrieved parties to seek redress
Prevailing Party Status
Plaintiff claims the district court committed an abuse of discretion when it failed to properly evaluate the five criteria normally used to determine whether an award of an attorney's fees is warranted under ERISA. These five factors known as the multi-factor test, are: "(1) the degree of the offending parties' culpability or bad faith; (2) the degree of the ability of the offending parties to satisfy personally an award of attorneys' fees; (3) whether or not an award of attorneys' fees against the offending parties would deter other persons acting under similar circumstances; (4) the amount of benefit conferred on members of the pension plan as a whole; and (5) the relative merits of the parties' positions." Nichol v. Pullman Standard, Inc., 889 F.2d 115, 121 n. 9 (7th Cir. 1989) (citations omitted). Plaintiff further asserts that as the prevailing party he is entitled to an award of attorney's fees. Plaintiff's reasoning is that he settled his claim in return for full coverage of his medical bills, thus he claims that he "succeed[ed] on any significant issue in litigation which achieves some of the benefit the parties sought in bringing suit." Hensley v. Eckerhart, 461 U.S. 424, 433, 103 S.Ct. 1933, 1939, 76 L.Ed.2d 40 (1983).
This multi-factor test, articulated for payment of attorney's fees to prevailing parties in civil rights claims, is not the test this Circuit uses to determine if a party that receives a settlement is a prevailing party under ERISA. Rootberg v. Central States et al., 856 F.2d 796, 799 (7th Cir.1988). The problem with claims that are settled is that there are reasons for parties to settle that are wholly unrelated to the substance and issues involved in the litigation. A suit may be groundless, and settled for its nuisance value, or settled by a party for wholly gratuitous reasons, thus not justifying an award of attorney's fees. Harrington v. DeVito, 656 F.2d 264, 266-67 (7th Cir.1981). When a cause is settled or disposed of without full litigation on the merits (as in this case), this Circuit applies a two-step analysis to determine if the party prevailed in the litigation. In In re Burlington Northern Inc., 832 F.2d 422, 425 (7th Cir.1987), we ruled that a party must initially prove that the outcome of the plaintiff's lawsuit must be causally linked to the achievement of the relief obtained. The lawsuit is causally linked to the relief obtained if it played a "provocative role in obtaining relief." Nanetti v. University of Illinois, 867 F.2d 990, 993 (7th Cir.1989) citing DeVito, 656 F.2d at 267. Therefore "the lawsuit must [be] a `catalyst' or `material factor' in obtaining concessions from the opponent and a favorable outcome to the dispute." Id. quoting Ekanem v. Health & Hospital Corp., 778 F.2d 1254, 1258 (7th Cir.1985); Stewart v. Hannon, 675 F.2d 846, 851 (7th Cir.1982).
In the instant case, while the record is clear that the coalition of people and organizations who joined together to provide for Hooper's treatment were not required to do so but donated out of the goodness of their heart, we cannot rule that the settlement was not "causally related" to the lawsuit. On May 25, 1993, TPA advised Hooper that his HDC-ABMT would not be covered under the Demco plan. On June 23, 1993, Hooper's physician requested that TPA reevaluate its decision. On August 4, 1993, TPA again advised Hooper that HDC-ABMT treatment fell into what the plan considered experimental and investigational treatment. This suit was filed on August 16, 1993. The settlement was reached and finalized on August 30, 1993. It is not clear from the record whether there would have been a settlement had the plaintiff not filed suit. Moreover, the record does not reveal when the parties began discussing a charitable fundraising effort (the charitable settlement came two weeks after the suit was commenced, but more that three months after TPA's initial decision to deny coverage).
While the timing of the settlement indirectly supports the plaintiff's claim to be a prevailing party, the defendant's position is
While the evidence against the plaintiff's position is substantial, the case cannot be characterized as frivolous either. Although the majority of the funds obtained for the plaintiff's care came from a number of charitable sources other than the defendant, these charitable sources clearly donated the funds after the defendant solicited their aid. While the various charitable donors' intention was not to relieve Demco of potential liability, but to aid Hooper, the timing of their assistance precludes a decision that the settlement was not causally linked to the lawsuit. In light of the close proximity of time between the filing of the suit and settlement (two weeks), the suit seems to have acted as a "catalyst" for the settlement and thus satisfies the causal link requirement. See Burlington, 832 F.2d at 425.
Under the second step of the Burlington analysis, however, the suit must have prompted the defendant (the settling party) to act or cease its behavior based on the strength of the case, not "wholly gratuitously" in response to the plaintiff's claims. Id. We review the second step, whether the defendant acted "wholly gratuitously" under the abuse of discretion standard. Id.; Dixon v. Chicago, 948 F.2d 355, 358 (7th Cir.1991). Thus, we must determine whether Demco settled this case with an eye towards its possible exposure if litigation progressed, or whether their motivation to settle was "wholly gratuitous."
We believe that the second step of the Burlington test removes the prevailing party status from the plaintiff. The record reveals that Demco tried in two separate ways to obtain treatment for the plaintiff. First, defense expert Dr. Weiss tried to get Hooper enrolled in a clinical test study of the effects of HDC-ABMT. Had he been successful, the plaintiff's treatment would have been free. Second, the defendant company, among others, was successful in organizing charitable funding for the plaintiff's treatment. Demco along with Demco employees, TPA, Manufacturers Life Insurance, the Children's Organ Transplant Association, and the University of Wisconsin Hospitals and Clinics, arranged for funding and facilities to enable the plaintiff to undergo HDC-ABMT. We are of the opinion that the nature of the defendant's actions (organizing a charitable fund drive) falls into the category of actions deemed "wholly gratuitous" and as such the plaintiff cannot be a prevailing party. That determination, however, is not the only basis for denying the plaintiff's request for fees. Even had the settlement given the plaintiff "prevailing party" status, ERISA requires the prevailing party to prove defendants presented a position that was unmeritorious.
The defendants rely on Production and Maintenance Employees Local 504 v. Roadmaster Corp., 954 F.2d 1397 (7th Cir.1992), for the standard to be applied for determining whether an award of attorney fees under 29 U.S.C. § 1132(g)(1) is warranted. In Roadmaster, the court concluded that the "bottom-line question" is whether an adverse party's position was "substantially justified" and taken in good faith. 954 F.2d at 1402. Section 502(g)(1) commits an award of attorney's fees to the discretion of the district court. Id. An award of attorney's fees under that section, will be reversed only if the court abused its discretion. Chrapliwy v. Uniroyal, Inc., 670 F.2d 760, 765 (7th Cir. 1982), cert. denied, 461 U.S. 956, 103 S.Ct. 2428, 77 L.Ed.2d 1315 (1983). As we stated in Bittner v. Sadoff & Rudoy Indus., 728 F.2d 820, 828 (7th Cir.1984), "[t]his discretion is not to be exercised without any criteria; it is not unlimited."
When a party prevails in an action under ERISA, the standard for awarding attorney's fees is the same as under the Equal Access to Justice Act. Bittner, 728 F.2d at 830. In Bittner, this court analogized a § 502(g)(1) claim to that of a request of attorney's fees under the Equal Access to
This circuit has addressed the seemingly conflicting standards of the multi-factor test (as enunciated in Nichol) cited by the plaintiff, and the "substantially justified" standard (from Bittner and Pritchard) cited by the defendant. As we noted in Tesch v. General Motors Corp., 937 F.2d 359, 363 (7th Cir. 1991), "[w]e need not concern ourselves with choosing between the multi-factor approach and Bittner's `substantially justified' standard," because both tests beget the same result, and it is "difficult to imagine a situation in which the application of one model rather than the other would alter our decision concerning the propriety of an award of costs or fees." Id., citing Nichol, 889 F.2d at 121-22. "[B]oth tests are designed to award costs and fees to the prevailing party where there is reason to believe that the losing party engaged in litigation merely to harass its opponent." Nichol, 889 F.2d at 122. Further, in Meredith v. Navistar Int'l Transp. Corp., 935 F.2d 124, 128 (7th Cir. 1991), this court held that "[w]hichever approach is used, the bottom-line question is essentially the same: was the losing party's position substantially justified and taken in good faith, or was that party simply out to harass its opponent?"
In the instant case, Demco properly denied coverage to Hooper only after seeking the advice and guidance of TPA, who sought two separate opinions from medical advisory boards. At every level, the use of HDC-ABMT was considered both "experimental" and "investigative" as those terms are defined in the exclusion section of the Demco Health Plan. Upon re-review, even with the new documentation provided by the plaintiff's doctor, UMAC came to the conclusion that HDC-ABMT was not a medical procedure generally used and accepted in the treatment of multiple myeloma. The plaintiff's own expert, Dr. Greipp, characterized the procedure not only as controversial, but still within the investigative stages. Moreover, plaintiff provided no evidence whatsoever that HDC-ABMT was considered by anyone to be a "generally accepted" treatment as those terms are used in the Demco plan.
Further, gratuitous donations to aid a dying person cannot and does not rise to the level of satisfying the standard of prevailing party in an ERISA lawsuit. Moreover, even if we were to grant the plaintiff prevailing party status, being the prevailing party is not sufficient in and of itself to justify an award of attorney's fees. In this case the settlement entered can by no means be considered as an admission of liability by the defendant, but rather an attempt to find alternative funding for the plaintiff's medical treatment. As such, the plaintiff was not the prevailing party under the test in this Circuit. In order to warrant an award of attorney's fees, the prevailing party must demonstrate that the losing party's position was not substantially justified, or that the losing party's position was taken to harass or vex the prevailing party. Meredith, 935 F.2d at 128. In this case there is no evidence to support that this was Demco's intent.
Defendant relied on TPA to provide impartial and extensive reviews of claims against the Demco plan. TPA itself utilized two separate and independent medical review organizations to review and then re-review the plaintiff's claim. Therefore, even if we had decided that Hooper was the prevailing party, we would still affirm the district court's decision not to grant the plaintiff his attorney's fees. For these reasons we find no abuse on the part of the district court and affirm its decision not to award attorney's fees to the plaintiff in this case.
The record reflects that Demco acted fairly and in good faith when it declined coverage for Hooper's treatment. The information available to Demco, TPA, UMAC, and MRIA indicated that the use of HDC-ABT for multiple myeloma was experimental and still in the investigative stage of the treatment's
MANION, Circuit Judge, concurring.
I concur. I agree with the court that Hooper is not a prevailing party, but write separately to emphasize that Farrar v. Hobby, ___ U.S. ___, ___, 113 S.Ct. 566, 573, 121 L.Ed.2d 494 (1992) appears to have limited "prevailing party" status to parties who have obtained "`an enforceable judgment, consent decree, or settlement giving some of the legal relief sought....'" See Zinn v. Shalala, 35 F.3d 273, 276 (7th Cir.1994) (Manion, J., dissenting) (quoting S-1 and S-2 v. State Bd. of Educ. of N.C., 21 F.3d 49, 51 (4th Cir.1994)). In any event, Hooper cannot recover attorney's fees under ERISA because he has not demonstrated that Demco's position was not substantially justified, or that it was taken to harass or vex the prevailing party. Opinion at 294-295.
18 F.3d at 1415.