What's a Good ERISA Lawyer Worth, Anyway?

That’s what this case here begins to answer, at least in the Boston market and in the context of the fees that should be awarded to a prevailing plaintiff. This case was intended to be the next in the series of recent Massachusetts/First Circuit centric decisions I started writing two weeks ago, and haven’t returned to since. It is interesting on two fronts, the first being, as intimated above, it’s survey of billing rates for ERISA counsel in the Boston market. The second is it provides a good explanation, as well as example, of applying a lodestar.

It seemed particularly timely to return to the series of recent decisions by bringing up this one, in light of the Supreme Court’s recent hearing of arguments on the question of the nature of attorney’s fee awards to prevailing plaintiffs in ERISA cases. That case, and the argument before the Court, revolved heavily around exactly what result adds up to a sufficient enough win by a plaintiff/plan participant to trigger an award of attorney’s fees, since an ERISA case involving denied benefits can end up with a result that falls anywhere across a broad continuum of possible outcomes that range from a win for the plan, to a remand back to the plan administrator to fix procedural errors and make a new decision, to an outright win for the plan participant. It is my view, even as predominately a defense lawyer, that those courts who use substantial success (under other names sometimes) by the plan participant in his or her suit as the proper trigger for awarding attorney’s fees under ERISA have it right. There are a lot of barriers to plan participants bringing suit over denied benefits that relate to the costs of doing so, including the fact that many cases simply don’t involve enough in benefit amounts to warrant the plan participant incurring the costs needed to prosecute a claim out of his or her own pocket; making attorney’s fees available so long as the participant proves some substantive problem in the handling of the claim, even if it only results in remand to the plan administrator, is both a necessary counterweight to this problem and consistent with the premise that a plan participant is entitled, even if not to benefits, than to the proper handling of his or her claim and a correct decision making process.

Indeed, if you think about it, the animating principle that makes arbitrary and capricious review morally appropriate is the idea that the decision must be based on a proper process; absent a proper process, the justification for allowing the plan administrator the leeway to make the decision, with only limited review by a court, is weak at best. One can only assume that the administrator’s decision making is appropriate, which is the essential assumption behind discretionary review, if in fact the process used to make that decision was correct; anything less, and there is no reason to assume a correct outcome by the administrator. From a practical perspective, as one who has represented various plan administrators over the years, there is nothing wrong with this approach and idea either, as it is my experience that most good companies strive for a proper process and a correct result (something that itself is dependent on a quality decision making process in the first instance).

For arbitrary and capricious review to exist in a fair legal system, there has to be a realistic opportunity for plan participants to test whether the process pursued was correct, and the opportunity to recover the legal costs incurred in proving that the process was flawed is a necessary part of that, as in its absence, participants will become, for financial reasons, even less likely than they are now to challenge the procedural underpinnings of decisions that go against them. This is simply logical, if you think about it. Why would any rational economic actor spend tens of thousands to prove a mere procedural error leading to remand to the administrator, in cases that often involve only five figures in benefits, absent a realistic opportunity to recoup those fees if correct in his or her belief that the process was flawed?

From this point of view, the exceptional (when compared to every other legal area I can think of at the moment) degree of latitude granted to the administrator by arbitrary and capricious review, something firmly shored up most recently by Chief Justice Roberts in Conkright v Frommert, must exist hand in hand with rules that create a realistic system under which participants can test the administrator’s process in reaching decisions, and the ability to recover legal fees by proving a procedural error and forcing a remand is a sensible part of that system.