Dist. Photo Inc. v. Dimitri Pyrros, M.D. & Zelen Pyrros, M.D., P.C.

DISTRICT PHOTO INC. HEALTH CARE PLAN, Plaintiff, v. DIMITRI PYRROS, M.D. AND ZELEN PYRROS, M.D., P.C., Defendants.

No. 13-CV-4285 (JFB)(SIL)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK

May 30, 2017

MEMORANDUM AND ORDER

JOSEPH F. BIANCO, District Judge:

On December 2, 2015, the Court denied both parties' respective motions for summary judgment in an oral ruling (the "Oral Ruling"). By motion filed February 11, 2016, defendants Dr. Dimitri Pyrros ("Dr. Pyrros"), a thoracic surgeon, and his practice, Zelen Pyrros, M.D., P.C. ("Zelen Pyrros") (collectively, "defendants"), requested that the Court reconsider the Oral Ruling in light of Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan, 136 S. Ct. 651 (2016), which abrogated the case on which this Court relied in initially denying summary judgment. See id. (abrogating Thurber v. Aetna Life Insurance Company, 712 F.3d 654 (2d Cir. 2013)). The Court granted the motion for reconsideration. See Dist. Photo Inc. v. Pyrros, No. 13-CV-4285(JFB)(SIL), 2016 WL 5407869, at *1 (E.D.N.Y. Sept. 28, 2016).

Defendants now move for attorneys' fees against plaintiff, arguing that they prevailed on the merits and that the factors enunciated in Chambless v. Masters, Mates & Pilots Pension Plan, 815 F.2d 869 (2d Cir. 1987) favor an award of fees. For the reasons set forth below, the Court, in its discretion, denies the motion in its entirety.

I. BACKGROUND

The Court assumes the parties' familiarity with the facts of this case, which were set forth more fully on the record in the Oral Ruling. (ECF No. 33 ("Ruling Tr.").) The Court reserves recitation of the relevant facts for the discussion below.

On July 30, 2013, plaintiff District Photo Inc. Health Care Plan ("the Plan" or "plaintiff"), brought this action, naming Dr. Pyrros and Zelen Pyrros as defendants, pursuant to the Employment Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1132(a)(3), seeking restitution of overpaid benefits in the amount of $140,400, and alleging breach of contract and unjust enrichment. In their October 18, 2013 Answer, defendants asserted a counterclaim seeking to recover additional funds not paid under settlement agreements with plaintiff.

On July 9, 2014, both plaintiff and defendants filed their respective motions for summary judgment. On December 2, 2015, the Court granted defendants' motion for summary judgment to the extent plaintiff sought to bring state law claims and denied the cross-motions in all other respects. In denying summary judgment with respect to plaintiff's ERISA claim, the Court concluded that the Plan Document's provision reserving the right to recover plan assets paid out by mistake created an equitable right, and then reasoned that, under Thurber, 712 F.3d 654, a claim for the return of overpaid benefits constitutes an action appropriate for equitable relief under 29 U.S.C. § 1132(a)(3). (Ruling Tr. at 8-10.) The Court further noted that, under Thurber, it was irrelevant that the money had not been separated from general funds or could have been dissipated. (Id. at 8-9.) The Court went on to conclude that issues of fact existed as to whether the initial payments to defendants were made in violation of the Plan, given that the parties disputed whether Dr. Pyrros served as a primary or assistant surgeon during the relevant procedure. (Id. at 12-14.) As for defendants' argument that plaintiff had settled via the letter agreements (the "Settlement Letters"), the Court reasoned that, under both ERISA and the Plan Document, if the Administrator's payments clearly violated the Plan, "ERISA would trump any agreement with the administrator related to overpayment [and] would preempt any contractual agreement that is plainly contrary to the plan terms." (Id. at 16.) Thus, the disputed issue of fact on Dr. Pyrros's role in the surgery precluded summary judgment on the basis of the Settlement Letters. (Id. at 17-18.)

The Supreme Court subsequently abrogated Thurber. See Montanile, 136 S. Ct. at 656 n.2, 658. Defendants then brought a motion for reconsideration, arguing that they were entitled to summary judgment based on the abrogation of Thurber. (ECF No. 35-1 at 3-6.) They also argued, for the first time, that (1) the alleged overpayment did not create an "equitable lien" based upon additional the language of the Plan Document; and (2) the Settlement Letters did not violate the Plan because the Plan Document's provision regarding "Emergency Care" authorized the alleged overpayments. (Compare id. at 9-11 (no equitable lien), 13-15 (payments authorized by "Emergency Care" provision), with ECF Nos. 19, 22, 25 (no mention of these arguments).)

By Memorandum and Order dated September 28, 2016 (the "Reconsideration Order"), this Court granted the motion for reconsideration. See Pyrros, 2016 WL 5407869, at *1. After concluding that Montanile did in fact abrogate Thurber, this Court found that plaintiff did not have a claim for equitable relief under Montanile because the funds from the settlement payments to defendants were not traceable. Id. at *2-3; see also Montanile, 136 S. Ct. at 658 ("[A] plaintiff [can] ordinarily enforce an equitable lien only against specifically identified funds that remain in the defendant's possession or against traceable items that the defendant purchased with the funds (e.g., identifiable property like a car). A defendant's expenditure of the entire identifiable fund on nontraceable items (like food or travel) destroys an equitable lien."). The Court further held that the Plan Document does not provide that "excess payments would be subject to an equitable lien" because the "Rights of Recovery section includes no . . . language regarding an equitable lien or constructive trust," even though another section of the Plan did so. Pyrros, 2016 WL 5407869, at *4-5. Moreover, theCourt found that the alleged overpayment did not violate the Plan Document because, under the Plan Document's Medical Benefit section, emergency care is paid "at the In-Network level of benefits" for out-of-network providers such as defendants, the "In-Network" reimbursement rate for surgery is 90%, and defendants provided emergency care to the beneficiary. Id. at *5 (quoting Plan Document and Summary Plan Description, Ex. 1 to Fishman Aff., ECF No. 19-2 ("Plan Document and Summary Plan Description"), at 24.) This entitled them to 90% reimbursement. Id. Because they received $325,500 through the Settlement Letters on a bill of $405,000, the Settlement Letters plainly complied with the Plan. Id. Finally, the Court pointed out that, under the Plan Document, the "Plan Administrator has the sole and absolute discretion to construe and interpret the provisions and terms of the plan, to resolve any disputes which may arise under the plan and otherwise determine the operation and administration of the plan." Id. at *6. (quoting Plan Document and Summary Plan Description at 61). As such, the Court concluded that, "because by the express terms of the Plan Document, the administrator had the sole and absolute discretion to resolve the dispute with Zelen Pyrros, the alleged overpayment [did] not violate the Plan Document." Id.¹ For these reasons, the Court granted summary judgment in defendants' favor.

Following this Court's decision on defendants' motion for reconsideration, defendants filed the present motion for attorneys' fees on November 1, 2016. (ECF No. 46.) Plaintiff filed an opposition on November 18, 2016 (ECF No. 48), and defendants replied on December 6, 2016. (ECF No. 49.) The Court heard oral argument on January 3, 2017 and requested supplemental briefing. (ECF No. 51.) Defendants filed a supplemental brief on January 11, 2017, plaintiff responded on January 16, 2017, and defendants replied on January 31, 2017. (ECF Nos. 53, 55, 56.) The Court has fully considered the parties' submissions.

II. Discussion

Defendants argue that the Court should award attorneys' fees because they succeeded on the merits of their summary judgment motion and the Chambless factors favor an award of fees. As set forth below, the Court concludes that, although defendants did succeed on the merits, the Chambless factors weigh against attorneys' fees here. Therefore, in its discretion, the Court declines to award fees.

A. Legal Standard

"The general rule in our legal system is that each party must pay its own attorney's fees and expenses." Perdue v. Kenny A. ex rel. Winn, 559 U.S. 542, 550 (2010). ERISA, however, provides that "the court in its discretion may allow a reasonable attorney's fee and costs of action to either party." Trustees of the N.Y. City Dist. Council of Carpenters v. American Concrete Solutions, Inc., No. 13-CV-4714 (RA), 2014 WL 7234596, at *5 (S.D.N.Y. Dec. 18, 2014) (quoting 29 U.S.C. § 1132(g)(1)).

A district court's discretion to award attorneys' fees under ERISA "is not unlimited." Donachie v. Liberty Life Assur. Co., 745 F.3d 41, 46 (2d Cir. 2014) (quotingHardt v. Reliance Standard Life Ins. Co., 560 U.S. 242, 254-55 (2010)). In Hardt, the Supreme Court established that a court may only award attorneys' fees to a party who has obtained "some degree of success on the merits." 560 U.S. at 255. A party satisfies this standard "if the court can fairly call the outcome of the litigation some success on the merits without conducting a lengthy inquiry into the question whether a particular party's success was substantial or occurred on a central issue." Id. (brackets omitted).

Under Hardt, the question of success on the merits is the only factor the court is required to consider. See Donachie, 745 F.3d at 46 ("After Hardt, whether a plaintiff has obtained some degree of success on the merits is the sole factor that a court must consider in exercising its discretion."). Hardt made clear, however, that a court may additionally, in its discretion, consider five other factors, see 560 U.S. at 249, known in this Circuit as the Chambless factors, which are:

(1

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