'Success' in ERISA Case Includes Having Case Sent Back to Ins. Co. - U.S. First Circuit
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'Success' in ERISA Case Includes Having Case Sent Back to Ins. Co.

What counts as a "success on the merits" for purposes of attorney fee-shifting in an ERISA claim? Diahann Gross' employer, Sun Life Insurance, denied her disability leave claim for numbness and fibromyalgia. In an earlier appeal, the First Circuit said that Sun Life's insurance plan contained an incorrect standard for evaluating disability claims. The court remanded to the insurance plan's administrator for further review.

In this appeal, Gross is asking for attorneys fees. Sun Life says she's not entitled to them -- at least at this point -- because she hasn't succeeded at anything yet. The First Circuit agreed with Gross, 2-1.

That's How We Spell 'SUFFICIENTLY MERITORIOUS'

Sun Life claimed that having her case remanded to the plan administrator was a mere "procedural victory," which wouldn't qualify her for attorneys fees. The standard for victory comes from the 2010 Supreme Court opinion in Hardt v. Reliance Standard Insurance Co.: A case is a success for fee-shifting purposes "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.'"

As far as the First Circuit is concerned, success is a "merits outcome [that] produces some meaningful benefit for the fee-seeker." Here, the court said, that happened: Gross said Sun Life shouldn't have denied her claim and the First Circuit agreed. "A remand to the claims administrator for reconsideration of benefits entitlement ordinarily will reflect the court's judgment that the plaintiff's claim is sufficiently meritorious that it must be reevaluated fairly and fully." This isn't a novel idea: The First Circuit joined other courts around the country in concluding that a remand is enough for attorneys fees.

Dissent

There are a few holes in the majority's logic, though, and Judge Bruce Selya wrote a dissent calling those out; he would deny Gross her attorneys fees because she won only a "procedural victory." He argued that Gross had won nothing other than "the battle over the standard of review," which is purely procedural. "Surviving to fight another day is not the same as winning the war (or even the same as winning a significant battle)," he wrote.

There's also the sticky situation of what happens if the plan administrator denies her claim even after applying the new standard of review. How could she base an intermediate claim for attorneys fees on "success" if she ultimately loses on the very claim she made in the first place? The majority's ruling struck Selya "as nothing more than a convoluted way of saying that a remand, without more, is sufficient to trigger an entitlement to a fee award."

Because the Supreme Court has left open the issue of whether a remand is enough to count for attorneys fees, expect to see this question back in the news.

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