Washington v. Lenzy Family Institute, Inc.

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF OHIO

EASTERN DIVISION

LEONARD WASHINGTON, ) CASE NO. 1:21-cv-1102

)

Plaintiff, ) JUDGE BRIDGET MEEHAN BRENNAN

)

v. )

) MEMORANDUM OPINION

LENZY FAMILY INSTITUTE, ) AND ORDER

INC., et al., )

)

Defendants. )

Before the Court is Plaintiff Leonard Washington’s (“Plaintiff”) second motion for default

judgment and for determination of damages. (Doc. No. 58.) For the reasons explained below,

Plaintiff’s motion is GRANTED in part and DENIED in part.

I. Background

A. Factual Background

Defendant Lenzy Institute, Inc. (“Lenzy”) is an Ohio nonprofit corporation offering

mental health diagnostic and curative services. (Doc. 37 at 1051, ¶ 7.)1 Lenzy’s principal place

of business is in Canton, Ohio. (Id.) Defendant Lenzy Institute Board of Directors (“Lenzy

Board”) is Lenzy’s governing body. (Id. at 1051, ¶ 8.) Defendant Elizabeth Lenzy (“Ms.

Lenzy”) is the Executive Director and key principal of the Lenzy Institute. (Id. at 1051, ¶ 9.)

Lenzy hired Plaintiff on or about October 27, 2016, as a Residential House Worker and

Treatment Counselor. (Id. at 1051, ¶ 10.) Plaintiff became a full-time Lenzy employee in

January 2018. (Id. at 1052, ¶ 14.)

1 For ease and consistency, record citations are to the electronically stamped CM/ECF document

and PageID# rather than any internal pagination.

On or about January 15, 2018, Lenzy announced a new healthcare group coverage plan,

and Plaintiff became insured under UnitedHealthcare Group Policy number 02Y9798 (the “First

UHC Plan”). (Id. at 1052, ¶ 13.) On or about February 1, 2019, Plaintiff’s coverage under the

First UHC Plan was replaced or substituted by UnitedHealthcare Group Policy number

GA2Y9798IM (the “Second UHC Plan”). (Id. at 1052, ¶ 15.) Lenzy management made

premium payments directly to UnitedHealthcare to fund the Plans. (Id. at 1052–53, ¶¶ 16–17.)

Lenzy funded the premium payments through monthly deductions from employee paychecks.

(Id.)

At some point, Lenzy stopped making the premium payments. (Id. at 1053, ¶ 17.)

Lenzy, however, continued making the monthly deductions. (Id.) UnitedHealthcare terminated

the Second UHC Plan on or about June 2, 2019. (Id. at 1053, ¶ 18.) Lenzy owed

UnitedHealthcare over $30,000 in unpaid premium payments. (Id. at 1053, ¶ 19.) Lenzy did

nothing to ensure Plaintiff received coverage under another plan. (Id. at 1054, ¶ 25.) Even after

the termination of the Second UHC Plan, Lenzy continued to deduct premium payments from

Plaintiff’s and other employees’ paychecks. (Id.) Neither Lenzy, the Lenzy Board, nor Ms.

Lenzy provided Plaintiff with notice or documentation of any modifications or changes to his

insurance coverage, including termination of coverage. (Id. at 1060–61, ¶ 58.) Plaintiff only

found out about the termination in coverage when a prescription was denied at a Marc’s

pharmacy and Plaintiff called Ms. Lenzy about the denial. (Id. at 1054, ¶ 23.)

During this time, Ms. Lenzy herself did not lose coverage after UnitedHealthcare’s

termination because she had supplemental policies through Aflac and Medicare. (Id. at 1055, ¶

32.) Plaintiff, on the other hand, was forced to go two or three months without medical

coverage. (Id. at 1055, ¶ 30.) During this period, Plaintiff’s marriage suffered because he and

his wife were unable to receive medical care or procure prescription medicine. (Id. at 1055, ¶

31.)

Lenzy terminated Plaintiff on March 16, 2020. (Id. at 1059, ¶ 45.) Throughout

Plaintiff’s tenure, Defendants were fiduciaries (id. at 1062, ¶ 66) and plan administrators under

ERISA (id. at 1060, ¶ 55). Concerning these roles, Defendants never provided Plaintiff with,

among other documentation, a Summary Plan Description (id. at 1059–61, ¶¶ 50, 58) and Annual

Funding Notices (id. at 1060, ¶¶ 53, 58).

B. Procedural History

Plaintiff filed his initial complaint on May 28, 2021. (Doc. 1.) Plaintiff filed an amended

complaint on October 29, 2021. (Doc. 22.) On March 6, 2023, Plaintiff filed a second amended

complaint, naming as defendants: Lenzy Family Institute, Inc.; Lenzy Family Institute Board of

Directors; and Elizabeth Lenzy. (Doc. 37.) Plaintiff brought five claims: violation of ERISA

(Count One); breach of fiduciary duties (Count Two); breach of fiduciary duties under R.C. §

4113.15(C) (Count Three); equitable estoppel under ERISA (Count Four); and promissory

estoppel (Count Five).

After Defendants’ counsel withdrew representation, this Court held a telephonic status

conference on June 13, 2023. The Court set June 30, 2023 as the deadline for Defendants to

respond to the second amended complaint, along with other deadlines. Defendants did not

submit a responsive pleading on or before June 30, 2023. Plaintiff filed a motion for default

judgment on July 6, 2023. (Doc. 50.) However, contrary to Federal Rule of Civil Procedure 55,

Plaintiff did not first request an entry of default from the Clerk. Therefore, the Court denied the

motion for default judgment without prejudice. On July 7, 2023, Plaintiff submitted an

application for an entry of default. (Doc. 51.) The Clerk entered default on July 10, 2023. (Doc.

52.) Plaintiff subsequently submitted a motion for default judgment. (Doc. 53.)

On October 18, 2023, the Court denied Plaintiff’s motion without prejudice. (Doc. 55.)

The Court did so because there was insufficient briefing or factual development of several issues

without which the Court could not properly rule on the motion.

As it relates to Count One, Plaintiff’s motion sought damages for violations of 29 U.S.C.

§1132(c)(1) and (3). However, the motion only demonstrated liability under § 1132(c)(1), not §

1132(c)(3). (Id. at 1220–21.) Further, the motion did not sufficiently address damages available

to Plaintiff for violations of § 1132. (Id. at 1221–22.) Damages are discretionary and statutorily

set at a maximum of $100 per day.2 (Id.) Plaintiff failed to explain why the Court should award

damages at all, and if so, why the maximum was necessary in this case. (Id.) Further, Plaintiff

failed to explain how he calculated the number of days in violation. (Id.) The Court instructed

Plaintiff to refile his motion, clearly articulating the violations of ERISA, why statutory penalties

should be imposed at all, and the calculation of damages if so. (Id. at 1222–23.)

As it relates to Counts Two and Four, the Court previously determined that Plaintiff was

entitled to relief. (Id. at 1223.) However, the Court found that Plaintiff did not show entitlement

to the monetary damages he seeks. (Id.) Specifically, Plaintiff failed to explain how the

exclusive remedy under 29 U.S.C. § 1132 permitted monetary relief under current case law,

which only allows “appropriate equitable relief.” (Id. at 1224.) If Plaintiff wanted to recover

monetary damages on these claims, the Court instructed Plaintiff to refile the motion to provide

the necessary analysis. (Id. at 1225.)

2 As noted in the Court’s prior order, the maximum is now $110. (Doc. 55 at 1222.) Plaintiff

has requested $100 as the statutory maximum. For purposes of this Order, the Court will assume

the maximum is $100 as requested by Plaintiff.

Lastly, as it relates to Counts Three and Five, the Court instructed Plaintiff to refile his

motion with briefing on whether these claims were preempted by ERISA. (Id.)

Plaintiff submitted another motion for default judgment, which is now before the Court.

(Doc. 58.) That motion addresses the above deficiencies identified by the Court and also

addresses Plaintiff’s request for attorneys’ fees and costs. (Id.)

II. Analysis

A. Legal Standard

Rule 55 of the Federal Rules of Civil Procedure governs the entry of default and default

judgment. “When a party against whom a judgment for affirmative relief is sought has failed to

plead or otherwise defend, and that failure is shown by affidavit or otherwise, the clerk must

enter the party’s default.” Fed. R. Civ. P. 55(a). After entry of default under Rule 55(a), the

party seeking relief may apply for a default judgment under Rule 55(b). Here, Plaintiff applied

for an entry of default on July 7, 2023. (Doc. 51.) The clerk entered Defendants’ default on July

10, 2023. (Doc. 52.)

Once default is entered, the defaulting party is deemed to have admitted all the well-

pleaded factual allegations in the complaint regarding liability, including jurisdictional

averments. Ford Motor Co. v. Cross, 441 F.Supp.2d 837, 846 (E.D. Mich. 2006) (citing

Visioneering Constr. v. U.S. Fid. & Guar., 661 F.2d 119, 124 (6th Cir. 1981)); see also Fed. R.

Civ. P. 8(b)(6) (“An allegation—other than one relating to the amount of damages—is admitted if

a responsive pleading is required and the allegation is not denied.”). Unlike allegations on

liability, damages allegations are not taken as true at this stage in litigation. N. Innovations

Holding Corp. v. Keto Plan, Inc., No. 21-cv-2172, 2022 WL 999150, at *3 (N.D. Ohio April 4,

2022). “[T]he civil rules ‘require that the party moving for a default judgment must present

some evidence of its damages.’” IBEW Loc. Union 82 v. Union Lighting Prot., No. 11-CV-208,

2012 WL 554573, at *1 (S.D. Ohio Feb. 21, 2012) (quoting Mill’s Pride, L.P. v. W.D. Miller

Enters., LLC, No. 07-cv-990, 2010 WL 987167, at *1 (S.D. Ohio Mar. 12, 2010)).

Federal Rule of Civil Procedure 55(b)(2) provides that a district court “may” hold a

hearing on a motion for default judgment when necessary to “conduct an accounting,” or

“determine the amount of damages.” But by its terms, the rule “does not require the district

court to conduct an evidentiary hearing.” Vesligaj v. Peterson, 331 F. App’x 351, 354 (6th Cir.

2009) (citing Fustok v. ContiCommodity Servs., Inc., 873 F.2d 38, 40 (2d Cir. 1989) (“[I]t was

not necessary for the District Court to hold a hearing, as long as it ensured that there was a basis

for the damages specified in a default judgment.”)). An evidentiary hearing is not necessary in

this case because the defendants “have shown that they do not intend to defend in this action.”

See Bradley v. Miller, No. 10-cv-760, 2015 WL 2130980, at *2 n.2 (S.D. Ohio May 7, 2015).

Further, as required by Vesligaj, 331 F. App’x at 354, there is a “basis for the damages specified”

in Plaintiff’s motion for default judgment—namely, the statutory penalty calculation and

calculation of compensatory damages.

B. Count One: ERISA Statutory Penalties

Plaintiff argues that the Court should assess Defendants the maximum statutory penalty

of $100 per day for each violation of 29 U.S.C. § 1132(c)(1)(A).3 Plaintiff argues that

Defendants violated § 1132(c)(1) by failing to provide annual funding notice for the 2018 plan

year. (Doc. 58 at 1242.) Plan funding notice must be provided “not later than 120 days after the

end of the plan year.” 29 U.S.C. § 1021(f)(3). Thus, starting from December 31, 2018, Plaintiff

3 Plaintiff does not argue, as he has in the past motions, entitlement to relief for violations of §

1132(c)(1)(B) nor § 1132(c)(3).

asserts that Defendants were required to provide notice no later than April 30, 2019 for the 2018

plan year. (Doc. 58 at 1242.) Defendants failed to timely do so. (Id. at 1241.) In fact,

Defendants still have not done so. (Id.) Recognizing that Plaintiff cannot recover statutory

damages to date, Plaintiff choose December 31, 2020 as the end date, the last year of his

employment. (Id. at 1242.) From these dates, Plaintiff claims 975 days have passed. (Id.)

Applying the statutory maximum, Plaintiff requests $97,500. (Id.) However, Plaintiff’s

calculation contains an error. Plaintiff asserts that Defendants had 120 days after the end of the

2018 plan year to provide notice. As stated by Plaintiff, that date is April 30, 2019 (120 days

after December 31, 2018). But then Plaintiff uses May 1, 2018 to calculate the time difference

rather than May 1, 2019. Thus, Plaintiff comes to 975 days, but that includes an extra year.

Between May 1, 2019 and December 31, 2020, there are 610 days. Accordingly, the Court will

not use 975 days for any penalty imposed for this violation, but instead, 610 days.

Separately, Plaintiff also argues that Defendants violated § 1132(c)(1) by failing to

provide annual funding notice for the 2019 plan year. (Id.) Section 1132(c)(1) states that “each

violation described in subparagraph (A) with respect to any single participant . . . shall be treated

as a separate violation.” Therefore, Plaintiff claims he should be able to recover for this

secondary violation. The 2019 plan year was terminated on June 2, 2019. (Id.) Defendants were

required to give notice of plan termination within 120 days, or September 30, 2019. (Id.)

Defendants did not provide that notice. (Id.) Using the same December 31, 2020 end date, 457

days have passed. (Id.) Applying the statutory maximum of $100, Plaintiff requests $45,700 for

this violation. (Id. at 1243.)

Combined, Plaintiff requests $143,200 for these violations. (Id.) Plaintiff acknowledges

a § 1132(c) monetary penalty is discretionary. See Cultrona v. Nationwide Life Ins. Co., 748 F.3d

698, 706 (6th Cir. 2014). Plaintiff argues that the facts of this case warrant a penalty “near the

maximum.” (Doc. 58 at 1241.)

“The purpose of 29 U.S.C. § 1132(c) is ‘to induce administrators to timely provide

participants with requested plan documents, and to penalize failures to do so.’” Bustetter v.

CEVA Logistics U.S., Inc., No. 18-cv-58, 2019 WL 6719485, at *5 (E.D. Ky. December 10,

2019) (quoting Bartling v. Fruehauf Corp., 29 F.3d 1062, 1068 (6th Cir. 1994)). A company has

a “duty to disclose the plan’s terms to the employee” regardless of any good faith beliefs. Gatlin

v. Nat’l Healthcare Corp., 16 F. App’x 283, 289 (6th Cir. 2001). Accordingly, courts find the

failure to provide notice “intentional” when the administrator makes “no effort to educate

themselves on their legal obligations as trustees.” McDowell v. Price, 853 F.Supp.2d 776, 796

(E.D. Ark. 2012). In similar vein, “neither prejudice nor injury are prerequisites to recovery

under the penalty provisions of the statute[.]” Cultrona, 748 F.3d at 708 (quoting Moothart v.

Bell, 21 F.3d 1499, 1506 (10th Cir. 1994)). Thus, “[a]lthough relevant, a defendant’s good faith

and the absence of harm do not preclude the imposition of the § 1132(c)(1)(A) penalty.” Hoskins

v. Snap-On Inc. Ret. Plan, No. 08-cv-3069, 2010 WL 2899074, at *22 (N.D. Iowa July 20, 2010)

(quoting Starr v. Metro Sys., Inc., 461 F.3d 1036, 1040 (8th Cir. 2006)).

While Plaintiff explains the above legal framework, Plaintiff does not explain why the

imposition of a penalty here is warranted under these facts. Presumably, Plaintiff’s recitation of

the facts here supports the imposition of a penalty. For instance, Plaintiff explains that Plaintiff

received no notice of either the 2018 plan nor termination of the 2019 plan. (Doc. 58 at 1243–

44.) He only discovered the termination of the 2019 plan at a Marc’s pharmacy when trying to

get a refill on medication, which was denied. (Id.) Blindsided, Plaintiff had to pay out of pocket

expenses and forego medical treatment and prescriptions, all the while Defendants were still

deducting premium payments from Plaintiff’s paychecks. (Id.)

But Plaintiff does not explain, and provides no case law analogies for, the amount of the

penalty the Court should impose in this case. For instance, there is no analysis regarding similar

cases and the penalties those courts imposed and why the facts of this case deserve the most

severe penalty. However, after reviewing some of the case law cited by Plaintiff, the Court finds

that a $25 per day penalty should be imposed.

In Bustetter, the court imposed a $25 per day penalty after finding the defendant’s

conduct amounted to negligence and where the defendant agreed to comply once notified of the

deficiency. 2019 WL 6719485, at *6. In Cultrona, the court imposed a $55 per day penalty

where defendants failed to provide a key document after plaintiff requested it, but where the

court also found the plaintiff’s allegations of prejudice and harm were “perfunctory and

unconvincing.” 748 F.3d at 708. In Hoskins, the court assessed a $25 per day penalty where the

defendant’s conduct was “discourteous, not in good faith, capable of prejudicing . . . and

delay[ed] resolution of the dispute.” 2010 WL 2899074, at *23.

Under the facts of this case, a $25 per day penalty is appropriate. The facts here indicate

that Defendants were more than just negligent. Defendants never agreed to comply with their

obligations, and indeed, have stopped defending this case. Moreover, Plaintiff has identified

some harm and prejudice from the failure to timely notify. For instance, Defendants continued to

withdraw premiums from Plaintiff’s paychecks which was not being used to pay the provider.

During this time period, Plaintiff believed he had insurance, when in fact he did not. After

discovering he had no insurance at a Marc’s pharmacy, Plaintiff had to pay out of pocket

expenses and had to make medical decisions he would not otherwise have needed to do if he had

insurance. If Defendants complied with ERISA, these issues would have been discovered. And,

all the while, Defendants had separate coverage for themselves. Yet at the same time, it appears

that the lack of coverage did not impact Plaintiff until he sought a prescription a few months

later. Plaintiff claims that he forewent medical treatment due to the lapse in coverage but fails to

specify what precisely he decided to forgo.

For these reasons, a statutory penalty of $25 per day is appropriate. For the first violation

consisting of 610 days, the penalty is $15,250. For the second violation consisting of 457 days,

the penalty is $11,425. The total penalty is $26,675.

C. Counts Two and Four: Monetary Damages

Plaintiff seeks to recover actual damages for his claims of breach of fiduciary duties and

equitable estoppel.4 Specifically, Plaintiff seeks damages relating to: insurance premiums

withdrawn from his paychecks that were not used to pay the insurer in the amount of $2,943.24;

out-of-pocket expenses for medical-related care in the amount of $165.00; and out-of-pocket

expenses relating to prescription medications in the amount of $341.98. (Doc. 58 at 1247–48.)

As stated in the Court’s previous orders, both of these claims must be brought under 29

U.S.C. § 1132(a)(3)(B). See McFadden v. R&R Engine & Mach. Co., 102 F.Supp.2d 458, 471

(N.D. Ohio 2000). Under that statute, Plaintiff is entitled to “appropriate equitable relief.”

Mertens v. Hewitt Assocs., 508 U.S. 248, 253 (1993). However, the Supreme Court has narrowly

construed this phrase. See Gerbec v. United States, 164 F.3d 1015, 1019 (6th Cir. 1999) (citing

Montanile v. Bd. of Trs. of Nat. Elevator Indus. Health Benefit Plan, 577 U.S. 136, 142 (2016)).

Under Montanile, Plaintiff may only seek “those categories of relief that were typically available

4 The Court has already determined Plaintiff is entitled to relief on these claims. Washington v.

Lenzy Fam. Inst., Inc., No. 21-cv-1102, 2023 WL 6879788, at *4 (N.D. Ohio Dec. 22, 2022).

The only issue is what damages Plaintiff is entitled to.

in equity during the dates of the divided bench.” Montanile, 577 U.S. 142. Accordingly, the

Court instructed Plaintiff, to the extent Plaintiff sought compensatory damages, to explain how

those damages fit into the statutory scheme of “appropriate equitable relief,” particularly

considering Supreme Court precedent.

Plaintiff argues the compensatory damages sought are “appropriate equitable relief”

under 29 U.S.C. § 1132. (Doc. 58 at 1245–47.) First, Plaintiff argues the holding in Mertens has

been roundly criticized because it may mean that plaintiffs are left without a remedy. (Id. at

1245.) The Sixth Circuit questioned the applicability of Mertens in Gerbec, noting the fierce

criticism of the Supreme Court’s limited holding. 164 F.3d at 1024. Second, the Supreme Court,

in dicta, seemingly limited its holding in Mertens to non-fiduciaries. See CIGNA Corp. v.

Amara, 563 U.S. 421, 441–42 (2011) (“insofar as an award of make-whole relief is concerned,

the fact that the defendant in this case, unlike the defendant in Mertens, is analogous to a trustee

makes a critical difference”). Meaning, compensatory damages against fiduciaries are

“appropriate equitable relief.” Id. at 441 (“Equity courts possessed the power to provide relief in

the form of monetary ‘compensation’ for a loss resulting from a trustee’s breach of duty, or to

prevent the trustee’s unjust enrichment.”).

Most recently, the Sixth Circuit held that “both disgorgement and equitable restitution

may be pursued through § 1132(a)(3).” Patterson v. United HealthCare Ins. Co., 76 F.4th 487,

497 (6th Cir. 2023). In Patterson, plaintiff was in a car accident. Id. at 491. After plaintiff’s

insurer paid medical bills, plaintiff sued the other car driver. Id. at 492. That case settled and

plaintiff’s insurer, citing the policy, requested plaintiff remit to them the cost of the medical bills

it paid for. Id. Plaintiff paid the insurer $25,000. Id. However, plaintiff later discovered that his

policy contained no such provision requiring him to pay the settlement money to his insurer. Id.

Plaintiff sued under § 1132(a)(3), seeking reimbursement of the $25,000. Id. The district court

granted a motion to dismiss, finding that the $25,000 was not “appropriate equitable relief”

because it really was compensatory damages. Id. The Sixth Circuit reversed. Id. at 496. The

central question was “whether a plaintiff ‘typically’ would have been able to obtain in a pre-

merger equity action the remedy he seeks under ERISA, recognizing that equity courts often

granted relief outside the bounds of ‘equitable’ relief as defined by the statute.” Id. (citing

Montanile, 577 U.S. at 142). In this case, the Sixth Circuit found that the breach of fiduciary

duty claim had an “equitable basis,” and that the insurer breached a fiduciary duty by improperly

soliciting the funds to be used “for its own purposes.” Id. Further, plaintiff could seek the

$25,000 under § 1132(a)(3) because “both disgorgement and equitable restitution may be

pursued through § 1132(a)(3).” Id. at 497. Both of these are equitable remedies available to

courts sitting in equity.

Similar to Patterson, the damages Plaintiff seeks here include insurance premiums paid

to Defendants which were never paid to the insurer. (Doc. 58 at 1247.) These damages, like

those in Patterson, are subject to equitable remedies to “deprive the wrongdoers of their net

profits from unlawful activity.” Patterson, 76 F.4th at 497. Accordingly, the Court will grant

Plaintiff’s request for $2,943.24 relating to the premium payments.

As it relates to the out-of-pocket expenses Plaintiff requests, Patterson is less helpful.

Patterson allowed the plaintiff to seek the $25,000 because it could be characterized as

disgorgement or restitution. Neither out-of-pocket expense neatly fit into either of those two

categories. However, other courts in this district have more generally allowed plaintiffs to seek

compensatory damages for breach of fiduciary duties. See Van Loo v. Cajun Operating Co., 64

F.Supp.3d 1007, 1024 (E.D. Mich. 2014) (discussing whether a plaintiff can seek compensatory

damages under § 1132 and concluding that plaintiff could proceed if they established a breach of

fiduciary duty); Teisman v. United of Omaha Life Ins. Co., 908 F.Supp.2d 875, 880 (W.D. Mich.

2012) (“when a fiduciary is involved, compensatory relief is a ‘typical equitable remedy’

available under § 1132(a)(3).”). Accordingly, the Court will allow Plaintiff to recover these

expenses, totaling $506.98.

D. Counts Three and Five: ERISA Preemption

Plaintiff also seeks default judgment on his state law claims. Count Three asserts a

violation of R.C. § 4113.15(C). (Doc. 37 at 1064.) Under this statute, Plaintiff claims that an

employer must timely pay the appropriate entity necessary to provide the benefits relating to any

employee authorized deductions. (Doc. 58 at 1250.) In essence, Defendants, by deducting the

premium payments from Plaintiff’s paychecks, were required to timely remit those payments to

the health insurer ensure medical coverage. (Id.) Defendants, having failed to do so, violated

R.C. § 4113.15(C). (Id.)

Count Five asserts a common law promissory estoppel claim under Ohio law. (Doc. 37 at

1067.) Plaintiff claims that Defendant’s promised to provide medical coverage and related

benefits. (Id.) Plaintiff allegedly reasonably relied on that promise to his detriment by allowing

premium payments to be deducted from his paychecks. (Id. at 1067–68.) When those deducted

payments were not made, Plaintiff was harmed. (Id.)

These claims are premised on Defendants’ failure to pay premiums deducted from

Plaintiff’s paychecks. As damages, Plaintiff seeks repayment of the premiums that were

deducted from his paycheck, as well as the recoupment of monies spent out of pocket while he

had no insurance coverage. These are the exact same grounds and damages Plaintiff seeks

through his ERISA claims under Counts Two and Four. In its Order, the Court instructed

Plaintiff to explain whether ERISA preempts his state law claims. (Doc. 55 at 1225.) While

Plaintiff has provided such argument (Doc. 58 at 1248), the Court finds it unnecessary to decide

whether ERISA preempts the state law claims.

Plaintiff seeks identical relief for his ERISA claims and state law claims—$3,450.22 in

compensatory damages representing the premium payments deducted but not paid and out-of-

pocket expenses. (Id. at 1252–53.) Plaintiff acknowledges as much for the promissory estoppel

claim. (Id. at 1252 (“even if this Court were to deem the promissory estoppel claim to be

preempted by ERISA, the same relief may be provided to Plaintiff for ERISA equitable estoppel

[Count Four].”).) However, Federal courts cannot grant default judgment as to damages that

would result in a double recovery. Rauh v. Zheng, No. 23-cv-2272, 2024 WL 3345453, at *7

(N.D. Ohio July 9, 2024) (“Federal courts are prohibited from granting default judgment as to

damages that would result in a double recovery for the same injury”) (citing Can IV Packard

Square, LLC v. Schubiner, No. 21-1717, 2022 WL 3335697, at *1 (6th Cir. Aug. 12, 2022));

Credit Acceptance Corp. v. Davisson, No. 08-cv-107, 2008 WL 11378851, at *5 (N.D. Ohio Nov.

24, 2008) (“Ohio law prevents a double recovery for the same injury”). Accordingly, because the

Court grants Plaintiff the same relief under Counts Two and Four, the Court will not grant

Plaintiff damages on Counts Three and Five and declines to decide whether these claims are

preempted.

E. Attorneys’ Fees

Plaintiff seeks attorneys’ fees and costs in the amount of $50,791.50 and $2,592.13

respectively. (Doc. 58 at 1253.) Under 29 U.S.C. § 1132(g)(1), “the court in its discretion may

allow a reasonable attorney’s fee and costs of action to either party.” The Sixth Circuit uses a

five-factor test to assess a request for attorneys’ fees and costs under § 1132:

(1) the degree of the opposing party’s culpability or bad faith; (2) the opposing

party’s ability to satisfy an award of attorney’s fees; (3) the deterrent effect of an

award on other persons under similar circumstances; (4) whether the party

requesting fees sought to confer a common benefit on all participants and

beneficiaries of an ERISA plan or resolve significant legal questions regarding

ERISA; and (5) the relative merits of the parties’ positions.

Moon v. Unum Provident Corp., 461 F.3d 639, 642 (6th Cir. 2006). No single factor is

dispositive. Id. at 642–43.

First, Defendants’ degree of culpability and bad faith weighs in favor of an award of

attorneys’ fees and costs. Defendants’ failure to provide notice of the 2018 plan is a clear

violation of ERISA. That failure, while perhaps not egregious on its own, is heightened by

Defendants’ subsequent failure to pay premiums Defendants were deducting from Plaintiff’s

paychecks, causing the termination of the plan, and then failing to notify Plaintiff of such

termination. In short, the ERISA violations in this case demonstrate a high degree of culpability

and bad faith.

Second, Defendants appear to be able to pay an award of attorneys’ fees and costs.

Plaintiff asserts that Defendants owned four properties. (Doc. 58 at 1255.) These properties

have a combined appraisal value of $347,700 with $21,535.69 in taxes owed. (Id.) None of the

properties currently have mortgages. (Id.) Accordingly, the Court finds Defendants are able to

pay attorneys’ fees and costs and so this factor weighs in favor of granting Plaintiff’s request for

attorneys’ fees and costs.

Third, an award of attorneys’ fees and costs in this case is likely to have a deterrent effect

on others. This factor “is one that is likely to have more significance in a case where the

defendant is highly culpable” than in cases of honest mistakes. Foltice v. Guardsman Prods.,

Inc., 98 F.3d 933, 937 (6th Cir. 1996). Moreover, where the facts present a close case and unique

circumstances, this factor will be less important. Moon, 461 F.3d at 645. Here, Defendants were

“highly culpable” and this is not a case of an honest mistake. Moreover, this case does not

present a close question nor unique factual scenarios. Instead, Defendants abandoned their

ERISA obligations all the while continued to collect premium payments for which they were not

remitting to the appropriate insurer. In other words, this is not a case where Defendants can

explain their conduct through an honest mistake.

Fourth, Plaintiff is not requesting fees sought to confer a common benefit on all

participants and beneficiaries of the ERISA plan. Therefore, this factor weighs against a finding

of attorneys’ fees.

Fifth, Plaintiff’s position in this matter is meritorious. The established facts demonstrate

clear violations of ERISA. Moreover, Defendants have failed to litigate this matter, resulting in

the default judgment as explained above. This is not an “extremely close case.” Moon, 461 F.3d

at at 646.

In sum, the factors overwhelming weigh in favor of granting Plaintiff’s request for

attorneys’ fees and costs, and so the Court will do so.

The next inquiry is the amount of attorneys’ fees and costs Plaintiff is entitled to.

Attorneys’ fees must be reasonable such that it “is adequately compensatory to attract competent

counsel yet which avoids producing a windfall for lawyers.” Geier v. Sundquist, 372 F.3d 784,

791 (6th Cir. 2004) (quoting Reed v. Rhodes, 179 F.3d 453, 471 (6th Cir. 1999)). The Court

starts with calculating the number of hours reasonably expended on the litigation and multiplies

it by a reasonable hourly rate. Jordan v. City of Cleveland, 464 F.3d 584, 602 (6th Cir. 2006).

Plaintiff bears the burden of demonstrating entitlement to attorneys’ fees with “evidence

supporting the hours worked and rates claimed.” Reed, 179 F.3d at 472 (quoting Hensley v.

Eckerhart, 461 U.S. 424, 433 (1983)).

In support of his request for attorneys’ fees, Plaintiff submitted an affidavit from his

attorneys, including time records. (Doc. 58-6.) The affidavit explains that Plaintiff’s attorneys

worked an hourly rate of $250.00 or $225.00 and paralegals worked an hourly rate of $85.00.

(Id. at 1270.) The affidavit attaches all relevant bills which totals $50,791.50. (Id. at 1271.) The

Court is satisfied that all time is adequately documented and the time expended was reasonable.

The submitted documents, however, do not explain whether the hourly rate is reasonable. “To

arrive at a reasonable hourly rate, courts use as a guideline the prevailing market rate, defined as

the rate that lawyers of comparable skill and experience can reasonably expect to command

within the venue of the court of record.” Geier, 372 F.3d at 791(citing Adock-Ladd v. Sec’y of

Treasury, 227 F.3d 343, 350 (6th Cir. 2000)). The affidavit submitted does not explain the

relevant attorney’s and paralegal’s skill level nor does the affidavit contain information relating

to comparable rates for other attorneys in the relevant market. Nonetheless, other courts

considering attorney fees in ERISA cases have awarded attorneys’ fees at rates lower than or like

those requested here by Plaintiff. See Soltysiak v. Unum Provident Corp., 480 F.Supp.2d 970,

976 (W.D. Mich. 2007) (awarding attorneys’ fees at a $280 hourly rate for attorneys and $100 for

paralegals in an ERISA action); Mikolajczyk v. Broadspire Servs., Inc., 499 F.Supp.2d 958, 967

(N.D. Ohio 2007) (awarding $51,989.50 in attorneys’ fees based on an hourly rate of $250 in

ERISA action). Accordingly, the Court finds the hourly rate requested here is reasonable. In

conclusion, the Court grants Plaintiff’s request for reasonable attorneys’ fees in the amount of

$50,791.50.

Plaintiff also submitted invoices for incurred litigation costs totaling $2,592.13. (Doc 58-

6.) The Court finds these costs are reasonable and awards Plaintiffs $2,592.13 in costs. (Id. at

1271.)

F. Pre- and Post- Judgment Interest

Plaintiff requests pre- and post- judgment interest. (Doc. 58 at 1255.) In ERISA cases,

an award of pre-judgment interest is in the discretion of the court. See Caffey v. Unum Life Ins.

Co., 302 F.3d 576, 585 (6th Cir. 2002) (“Although ERISA does not mandate the award of

prejudgment interest to prevailing plan participants, we have long recognized that the district

court may do so at its discretion in accordance with general equitable principles.”). However,

plaintiffs are not entitled to pre-judgment interest on an award of 29 U.S.C. 1132 statutory

penalties. See Greenwald v. Liberty Life Assur. Co. of Boston, 932 F.Supp.2d 1018, 1052 (D.

Neb. 2013) (declining to award pre-judgment interest on § 1132 award). This is because pre-

judgment interest is designed to compensate plaintiffs for the loss of money owed. Schumacher

v. AK Steel Corp. Ret. Accumulation Pension Plan, 711 F.3d 675, 686 (6th Cir. 2013) (“One

purpose of an award of pre-judgment interest is to compensate plaintiffs for the lost interest

value of money wrongly withheld”) (quotation and citation omitted). “But § 1132 damages are

punitive, not compensatory, in nature.” Greenwald, 932 F.Supp.2d at 1052. Accordingly, the

Court declines to award pre-judgment interest on the statutory penalty under § 1132.

However, Plaintiff is entitled to pre-judgment interests on the compensatory portion of

his damages in this case stemming from the premium payments and out of pocket expenses,

totaling $3,450.22. Generally, pre-judgment interest is governed by state law, but in ERISA

cases, federal courts typically apply federal law because ERISA is an exclusively federal issue.

See Rybarczyk v. TRW, Inc., 235 F.3d 975, 985 (6th Cir. 2000) (explaining that in calculating

pre-judgment interest in ERISA cases, courts disfavor “simply adopting state law interest rates”

because “ERISA is not an area primarily of state concern”) (quotations and citations omitted).

The Sixth Circuit has upheld pre-judgment calculations which use the federal post-judgment rate.

See id. (“We have upheld a district court’s award of prejudgment interest calculated under 28

U.S.C. § 1961”) (citing Ford v. Uniroyal, 154 F.3d 613, 616 (6th Cir. 1998)). Here, the post-

judgment interest rate under 28 U.S.C. § 1961 is the weekly average one-year Treasury constant

maturities rate for the calendar week preceding judgment. As of August 19, 2024, that rate is

4.45%. Accordingly, the Court will apply pre-judgment interest on the $3,450.22. The Court

will use the date of the filing of the complaint as the accrual date for pre-judgment interest.

Here, that date is May 28, 2021. Judgment is entered as of August 19, 2024. Thus, pre-

judgment interest on $3,450.22 at a rate of 4.45% compounded annually from May 28, 2021

through August 19, 2024 is $521.24.

Post-judgment interest is statutorily mandated under 28 U.S.C. § 1961. As explained

above, the rate is 4.45%. Thus, Plaintiff is entitled to post-judgment interest beginning on

August 19, 2024 at a rate of 4.45% compounded annually. Post-judgment interest is inclusive of

all money damages, including pre-judgment interest, attorneys’ fees, and costs. See Caffey, 302

F.3d at 586 (“postjudgment interest should be awarded on the entire amount of the judgment,

including any prejudgment interest.”); Vick v. Metropolitan Life Ins. Co., No. 03-cv-73124, 2006

WL 8431558, * at 6 (E.D. Mich. June 22, 2006) (“Post-judgment interest should be imposed on

all money damages including pre-judgment interest and attorney fees.”). Accordingly, Plaintiff

is entitled to post-judgment interest on the combined sum of $84,030.09.

III. Conclusion

For the reasons explained above, Plaintiff’s motion for default judgment is GRANTED in

part and DENIED in part. Plaintiff is entitled to penalties under 29 U.S.C. § 1132 in the amount

of $26,675.00. Plaintiff is entitled to $3,450.22 in compensatory damages. The Court further

awards Plaintiff attorney’s fees in the amount of $50,791.50 and costs in the amount of

$2,592.13. Plaintiff is entitled to pre-judgment interest on the compensatory damages 1n the

amount of $521.24. Plaintiff is entitled to post-judgment interest on all amounts pursuant to 28

U.S.C. § 1961 at 4.45%.

IT IS SO ORDERED.

Date: August 19, 2024 if

GET MEE AN

UNITED STAT ISTRICT JUDGE