What happens when the ERISA claimant files suit after the disability claim has been denied, and then the ERISA claims administrator reinstates benefits retroactively?

Doesn’t reinstatement “moot” the issues in the lawsuit, or make claims regarding future benefits unripe — requiring dismissal of the suit? YES it should.

And a Plaintiff’s decision to continue the case after reinstatement may expose the plaintiff to an award of attorney fees to the defendant.

The procedural history is actually more important than the final holding in this new case: Peer v. Liberty-Life Insurance Company, __ F.3d __, 2021 WL 1257440 (11th Cir. April 6, 2021)(District court awarded defendant attorney fees, to be paid by plaintiff’s attorney, after plaintiff’s attorney refused to dismiss case after reinstatement. Reinstatement eliminated any justiciable controversy. The Court of Appeals reversed and remanded solely on the basis that the district court could impose fees only against a party, and not her attorney.)

FACTS: Peer sought ERISA-governed disability benefits. After Liberty Life determined Peer was not disabled from “any occupation” Peer brought suit seeking (1) waiver of premium, (2) a “clarification of her right to future benefits,” and (3) “a reasonable claims procedure going forward.” After suit was filed, Liberty Life “gave up,” reinstating coverage and the waiver of premium benefit retroactive to the original termination date.

Liberty Life reasonably thought that its decision to put Peer back on claim should have resolved all issues, and told the court the remaining issues on the pending motion for summary judgment were moot. The court concluded that each remaining issue was rendered moot by the reinstatement of coverage or was “confusingly intertwined” with the mooted issues.

Peer then amended her complaint twice, incorporating by reference 46 paragraphs from her original complaint. The district court concluded: (1) “Peer has already received the relief that she seeks; (2) ‘there is no further relief that the Court can award [Peer]’; and (3) any claim for adjudication of the right to future benefits was unripe.”

The district court later awarded Liberty Life attorney fees incurred “for any work performed after the reinstatement of Peer’s policy, including fees for litigating the appeal.”

The Court required Peer’s attorney to pay the fees in part because Plaintiff’s counsel “had 30 years of ERISA experience and ‘should have known that [Peer’s] case was moot and that there was no further justiciable controversy between the parties.” Peer appealed.

11th CIRCUIT HELD:

  1. ERISA provides that “the court in its discretion may allow a reasonable attorney’s fee and costs of action to either party.” Op. at 6
  2. As a matter of first impression, the Court concluded that a court does not have discretion “to require an attorney to pay another party’s fee.” Op. at 6 (emphasis in original).
  3. The ruling, that an attorney fee award cannot be assessed against the attorney, “comports with the longstanding rule that clients are responsible for the actions of their lawyers, not the other way around.” Op. at 11.
  4. The Court concluded the district court abused its discretion in assessing fees against Plaintiff’s counsel because ERISA does not allow the court to impose fees against the party’s attorney. The Court remanded the case for proceedings consistent with the opinion.