:: Reversal Of Benefits Decision On Remand To Plan Administrator Warrants Attorneys’ Fees Award

As a prevailing ERISA plaintiff, Flom is entitled to an award of fees unless such an award would be unjust. Because there are no circumstances that would make an award unjust in this case, we reverse and remand for an award of fees.

Flom v. Holly Corp. Slip Copy, 2008 WL 1924944 (C.A.9 (Mont.)) May 01, 2008

This short memorandum opinion sets forth the essential test for “prevailing party” status so as to merit an award of attorneys’ fees. In this case, the district court denied the plaintiff’s motion, but the Ninth Circuit reversed based upon the fact that the district court had remanded the case to the plan administrator and the remand did effect a change in his legal relationship with the plan.

The Facts

The case came before the district court after a denial of disability benefits. Flom requested fees after Metropolitan Life Insurance Company (“MetLife”) reinstated his disability benefits following the district court’s decision to remand his ERISA case to MetLife.

The General Rule

A prevailing ERISA plaintiff is entitled to attorney’s fees unless special circumstances would render such an award unjust. Smith v. CMTA-IAM Pension Trust, 746 F.2d 587, 589 (9th Cir.1984).

Prevailing Party Defined

The Ninth Circuit noted that a prevailing party is one who achieves a judicially sanctioned and material change in the legal relationship between the parties. Buckhannon Bd. & Care Home, Inc. v. W. Virginia Dep’t of Health & Human Res., 532 U.S. 598, 604-05 (2001).

Need Not Be Judgment On The Merits

This judicially-sanctioned change in the parties’ relationship need not be a judgment on the merits, and a prevailing plaintiff need not achieve directly through the judicial order itself the ultimate benefit sought. (citing Carbonell v. I.N.S., 429 F.3d 894, 899 (9th Cir.2005); and Hewitt v. Helms, 482 U.S. 755, 761 (1987) (“[T]he judicial decree is not the end but the means…. The real value of the judicial pronouncement … is in the settling of some dispute which affects the behavior of the defendant towards the plaintiff.”).

Administrative Agency Analogy

In this case the administrative agency analogy worked in the plaintiff’s favor. The Ninth Circuit stated:

As we have previously recognized, an order remanding a case to an ERISA plan administrator is analogous to a district court order remanding a case to an administrative agency. See Williamson v. UNUM Life Ins. Co. of America, 160 F.3d 1247, 1251 (9th Cir.1998). When a district court remands a case to an administrative agency, that remand can provide the judicial imprimatur necessary for a party to become a prevailing party.

Thus, the Court concluded that, since the plaintiff’s complaint alleged that MetLife wrongfully denied him benefits, and he requested, inter alia, any such relief as the court deemed proper, the issue fell within the prevailing party rule when the case was remanded. In the words of the Court:

When the district court remanded to MetLife, Flom achieved a judicially-sanctioned change in his relationship with MetLife and received “some relief” from the court on his claim. As a result of the remand, MetLife was required to allow Flom to submit additional information and to consider that information in evaluating his claim for benefits. On remand, MetLife reinstated Flom’s benefits. The district court’s remand provided the judicial imprimatur required by Buckhannon-it changed Flom’s legal relationship with MetLife and ultimately led to Flom’s success in securing a reinstatement of benefits. As a result, Flom is a prevailing ERISA plaintiff.

Note: The court noted that the case does not constitute precedent except as provided by 9th Cir. R. 36-3.

Preservation Of Issue – While it is, of course, best not to have to worry about such things, the Court did not view the issue as one that turned on preservation of the issue or not, stating:

It is not relevant whether Flom raised the argument in district court that ultimately led to the reinstatement of benefits or whether the court raised it sua sponte. An award of attorney’s fees ordinarily protects ERISA plaintiffs, not their lawyers, and the performance of Flom’s counsel is not relevant to Flom’s status as a prevailing plaintiff.

Supporting Authorities – In support of its holding the court cited the following:

. . . an alien may be a prevailing party under the Equal Access to Justice Act when the court remands his case to the Board of Immigration Appeals, regardless of the fact that the court does not decide the merits of the underlying claim. Rueda-Menicucci v. I.N.S., 132 F.3d 493, 495 (9th Cir.1997); see also Li v. Keisler, 505 F.3d 913, 917-18 (9th Cir.2007); and Johnson v. Gonzales, 416 F.3d 205, 208-10 (3rd Cir.2005) (joining the Ninth and Seventh Circuits in concluding that an alien who prevails on a petition for review and whose case is remanded to the BIA is a “prevailing party”). Similarly, when a court remands a claimant’s case seeking Social Security benefits to the agency pursuant to “sentence four,” the claimant is a prevailing party even though the court’s only action is to remand the case. See Shalala v. Schaefer, 509 U.S. 292, 300-02 (1993). Even when a court remands such a case pursuant to “sentence six” and retains jurisdiction over the case, the claimant is a prevailing party if the agency determines on remand that the claimant is entitled to benefits. Hoa Hong Van v. Barnhart, 483 F.3d 600, 607 (9th Cir.2007).FN1 As another Circuit has explained, “[an administrative] remand granting the party relief on the merits with retention of jurisdiction … creates a prevailing party … if the party obtains the benefits it sought before the agency.” Former Employees of Motorola Ceramic Products v. United States, 336 F.3d 1360, 1367 (Fed.Cir.2003).

More On Attorneys’ Fees – District court rulings are reviewed for an abuse of discretion. In the Carbonell v. I.N.S., 429 F.3d 894, 899 (9th Cir.2005) opinion, the Court stated the test as defined by the Supreme Court as follows:

According to Buckhannon [Bd. & Care Home, Inc. v. West Virginia Dep’t of Health & Human Res., 532 U.S. 598 (2001], a litigant must meet two criteria to qualify as a prevailing party. First, he must achieve a “material alteration of the legal relationship of the parties.” Second, that alteration must be “judicially sanctioned.” Id. at 604-05, 121 S.Ct. 1835; Labotest, Inc. v. Bonta, 297 F.3d 892, 895 (9th Cir.2002)

Thus, the test requires that a litigant:

1. achieve a “material alteration of the legal relationship of the parties.” and
2. that alteration must be “judicially sanctioned.”

Caution – In Bell v. Board Of County Com’rs Of Jefferson County, 451 F.3d 1097 (10th Cir. 2006), the Tenth Circuit declined to follow Carbonell v. I.N.S. and noted:

The Ninth Circuit diverges from its sister circuits on this issue by conflating the mere contractual enforcement of a settlement agreement and the judicial enforcement of a court order incorporating the terms of a settlement agreement. In Barrios v. California Interscholastic Federation, 277 F.3d 1128 (9th Cir.2002), the plaintiff claimed prevailing party status based on a settlement that was not incorporated in a court order. Initially, the settlement had been embodied in a judgment for the plaintiff. However, that judgment was vacated and ultimately replaced by a stipulation of dismissal after the defendant objected that they had never contemplated the entry of an executable judgment. Id. at 1133. The Barrios court held that the plaintiff was entitled to fees because “his settlement agreement affords him a legally enforceable instrument” sufficient for prevailing party status under pre-Buckhannon precedent. Id. at 1134 n. 5 (characterizing Buckhannon’s general discussion of prevailing party status as dictum). The Ninth Circuit has since reaffirmed this holding, see Carbonell v. INS, 429 F.3d 894, 899 (9th Cir.2005), while at the same time insisting that its law is consistent with the prevailing approach discussed above. See id. at 901. This position can be maintained only by denying the difference between an “instrument” enforceable as a matter of contract law and a court order enforceable as a matter of judicial oversight–a distinction that is self-evident and widely acknowledged (even by the Ninth Circuit in Carbonell, see id. at 901). See, e.g., Smyth, 282 F.3d at 281-84 (discussing Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994)). More to the point, denying this distinction would render the prevailing approach to settlement agreements (and the Buckhannon passages from which it derives) meaningless, because any such agreement, however private, is a legally enforceable contract.