You already know that the final battleground in lawsuits seeking ERISA-governed long term disability (LTD) benefits is whether a prevailing plaintiff should be awarded prevailing party attorney fees.

Should plaintiffs always recover attorney fees when the ultimate decision to deny benefits “was a close call” …and both sides’ positions had merit? No.  And this new case explains the point.

There is no guarantee that a prevailing plaintiff should be awarded fees, even when a court awards benefits in a plaintiff’s favor.

This is especially true when the decision to deny benefits is well supported in the administrative record (with independent medical reviewers), and both parties’ positions had merit. Messing v. Provident Life and Accident Ins. Co., 2023 WL 5497946 (W.D. MI August 25, 2023)(Plaintiff won reinstatement of LTD benefits.  But court, applying five factor test on whether to award attorney fees, denied plaintiff prevailing party attorney fees.)

FACTS: Messing, a trial attorney, filed suit and won reinstatement of ERISA-governed term disability benefits. Plaintiff’s counsel then sought attorney fees under Section 1132.

DISTRICT COURT: Plaintiff’s Motion for attorney fees denied even though Plaintiff won reinstatement of benefits.

RATIONALE:

1. “[T]he Court must first determine that the movant has achieved ‘some success on the merits.’”  The Court concluded Plaintiff satisfied this factor.  Op. at 6.  The Court then applies five factors to determine whether attorney fees should be awarded.

2.  Applying the five factors to determine whether to award attorneys’ fees under ERISA:
   • Degree of Opposing Party’s Culpability or Bad Faith.
     • The administrator’s labeling Plaintiff a “trial attorney” or “attorney” did not show bad faith because “ ‘[w]e need not fret over the difference between the meaning of ‘personal injury trial attorney’ and ‘attorney’ because the Plan requires that we focus our analysis on what duties Messing performed, not what title he held.”  Op. at 7.
     • “[T]he Sixth Circuit has found culpability ‘where the administrator terminated benefits based primarily on the opinions of doctors employed by the company’s own claim department.’”  But Provident “terminated Plaintiff’s benefits after review and/or consultation by four different professionals….” This included at least one “independent medical expert hired by Defendant.”  Op. at 8.
     • The Court noted that Provident considered Plaintiff’s submitted evidence from other attorneys that the practice of law was stressful, and that Plaintiff “had practiced law while disabled.”  Op. at 9.
   • Opposing Party’s Ability to Satisfy an Award of Attorney’s Fees.  Both parties agreed Provident was “capable of satisfying an award of attorneys’ fees” but this factor “is of limited value here where fees are sought by a successful claimant from a plan administrator.” Op. at 10.
   • Deterrent Effect of Award on Other Persons Under Similar Circumstances. This factor “is one that is likely to have more significance in a case where the defendant is ‘highly culpable.’”  Op. at 10.  This Court found this factor “cuts both ways.” Op. at 12.  “‘Honest mistakes are bound to happen from time to time, and fee awards are likely to have the greatest deterrent effect when deliberate misconduct is in the offing.’” Op. at 10-11. Provident was “not highly culpable in incorrectly weighing the evidence of Plaintiff’s disability.  Even though Defendant ultimately came to the wrong decision, there was evidence to support its conclusion that Plaintiff was no longer disabled.”  “[L]osing records,” or asserting a counterclaim, for examples, “do not constitute ‘highly culpable’ conduct.”  Op. at 11. But administrators should “ensure that the opinions on which they rely…are based on a thorough review of the administrative record.” Op. at 11 (emph. added).
   • Conferring a Common Benefit or Resolving Significant Legal Questions Regarding ERISA. “Plaintiff neither sought to confer a common benefit…nor sought to resolve a significant legal question by suing to have his benefits reinstated.”  Op. at 12.  The only possible novel legal issue resolved by the case pertained to Provident’s counterclaim “which is not attributable to Plaintiff. When he filed his claim Plaintiff did not seek to answer a question that was raised by Defendant’s subsequent counterclaim.”  Op. at 12.
   • Relative Merits of the Parties Position. “[F]or the relative merits of the parties’ positions to favor an award of attorneys’ fees, Plaintiff must show more than simply prevailing on the merits.” Op. at 13 (multiple cases cited). Plaintiff has proved by a preponderance of the evidence that he remains disabled.  In close cases, a victory under this standard is almost evenly split….Both parties’ positions had merit.  Therefore the fifth factor does not weigh in favor of granting fees.”  Op. at 14.

In those close cases, where the administrative record presents strong support for denial of benefits, consider challenging an award of attorney fees, even when the Court rules in favor of plaintiff.