What Are the Costs and Risks to Administrators When District Courts Remand Benefit Denials Back to Them?

I have been writing a lot recently about big picture items, from Supreme Court cases over ERISA’s statute of limitations to the ability of plan sponsors to legally control litigation against them, and everything in between. It is worth remembering, however, that ERISA is a nuts and bolts statute that is litigated day in and day out, often by plan participants for whom the pension or lump sum or disability benefit at issue is the most important financial vehicle open to them. As a result, the details of litigating under the statute are of supreme importance to them.

One of the technical and less sexy areas of litigating these types of cases concerns the circumstances in which federal District Courts, in deciding benefit disputes, elect not to enter an order granting benefits to a participant because of flaws found in an administrator’s processing of a claim for benefits, but instead order the administrator to revisit the issue, in much the same way that an appeals court would remand a case back to a trial court for further proceedings. Issues arising from this type of a remand have become more and more important over the years, as the district courts have become more inclined to remand benefit denials back to administrators for further review as opposed to overturning a denial outright and awarding benefits. Partly, this has occurred because of years of defense lawyers arguing that this is the appropriate way of proceeding, with the courts eventually coming around. Defense lawyers pressed this point in benefit litigation for years before it really became the standard mode of operating for many trial judges, and the reason was simple. It gave the administrator two bites at the apple, in the sense of they would either win at the district court by having the denial upheld by the court or, worst case, would get to decide the issue again on remand. For administrators and plans, this beat the heck out of having a benefit decision up on summary judgment before a court with one of two possible outcomes, those being the court upholding the denial or instead the court granting the benefits to the participant. The remand argument, at a minimum, meant that a court considering a benefit denial on summary judgment would be invited to make any of three decisions, only one of which was truly and immediately detrimental to the administrator, which are: (1) uphold the denial of benefits; (2) overturn the denial and grant the benefits; or (3) remand the denial to the administrator to redo the whole thing.

My friend, colleague, and sometimes adversary, ERISA lawyer Jonathan Feigenbaum, recently won a pair of significant rulings from the First and Second circuits (he will have to try for the Third and Fourth in short order, so as to hit for the cycle) on two key issues arising out of remands of this nature to an administrator, one being the circumstances in which attorney’s fees can be awarded and the other being whether a plan or its insurer can appeal a district court order remanding the benefit dispute back to the administrator for further analysis. The two decisions, and the two issues, are interconnected in an interesting way. In one, the First Circuit’s ruling in Gross v. Sun Life, the Court held that such a remand order is sufficient success on the merits of the case to support an award of attorney’s fees. In the other, the Second Circuit’s opinion in Mead v. Reliastar Life Insurance Company, the Court held that such a remand order is not appealable, as it is not a final order.

Together, they form an interesting counter to the preference of administrators and their lawyers to seek a remand, rather than an outright reversal, when a district court finds problems with an administrator’s benefit determination. They stand for the proposition that administrators may be able to seek that relief, but if they get it, they will have to pay attorney’s fees to the participant and will not have an opportunity to test the remand order on appeal until the entire benefit dispute has been conclusively resolved once and for all at the district court level. Together, they represent an interesting doctrinal response to the preference of administrators to seek remand when problems are found with a benefit determination. Like all legal doctrines, it needs a catchy name – like the Younger doctrine is for abstention – if it is to get much traction in the legal literature. Let’s call it the “Feigenbaum doctrine.”
 

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