So you have an unwinnable lawsuit alleging wrongful denial of ERISA benefits. How do you stop the bleeding?

Paying the claim during the lawsuit may moot the claims and end it right there, even if plaintiff continues to seek attorney fees.

Here’s the decision of Templin v. Independence Blue Cross, (E. D. Pa. May 13, 2011) (no determination has been made as to publication). It shows what can happen when the ERISA plan decides to pay a claim during a pending lawsuit alleging wrongful denial of benefits.

Does payment of the claim render the lawsuit moot? Yes.

Does plaintiffs’ claim for attorney fees trump the mootness principle? Maybe not.

FACTS: Both plaintiffs were hemophiliacs covered under an ERISA health plan and they sought prescription benefits–payments for a blood medication. After defendants denied the benefit, plaintiffs sued and the Court ordered defendants to conduct an expedited administrative review. Following expedited review, defendants approved the claims. Defendants then moved to dismiss, contending the claims pending before the court were moot. Plaintiffs argued, however that mootness did not apply because plaintiffs’ attorney fees and costs had not been paid.

TRIAL COURT HELD: Defendants approved the claim during the pending lawsuit and therefore the claims are moot, even though plaintiffs’ continue to seek attorneys fees in the lawsuit.

RATIONALE:

  1. “Under traditional mootness principles, ‘[o]nce the defendant offers to satisfy the plaintiff’s entire demand, there is no dispute over which to litigate” and the payment ‘will generally moot the claim.” Op. at 10
  2. The case became moot once the disputed claims for benefits were paid. Id.
  3. “‘[A] request for [attorney] fees does not preserve a claim that otherwise has become moot.'” Op. at 11 (emph. added), citing Tannenbaum v. Unum Life Ins. Co, of Am., 2010 WL 2649875 at 6, n.14 (E.D. Pa, June 30, 2010) and Lewis v. Continental Bank Corp., 494 U.S. 472, 480 (1990)(a plaintiff’s “interest in attorney’s fees is …insufficient to create an Article III case or controversy where none exists on the merits of the underlying claim”). Op. at 11.
  4. Plaintiffs’ attorney fees incurred during the pre-litigation administrative process are not recoverable. “[T]his holding would apply to equal force to [attorney fees incurred during] administrative proceedings post-filing of the complaint in a case where plaintiff failed to exhaust administrative remedies before filing suit.” Op. at 11, n. 14.