ERISA’s Fee-Shifting Provision Permits Awards Against Parties, Not Attorneys

Does ERISA’s fee-shifting provision, 29 U.S.C. § 1132(g)(1), permit a court to award fees against a party’s counsel?  Deciding this issue of first impression that has divided district courts within and without the Eleventh Circuit, the court in Peer v. Liberty Life Assurance Co. of Boston, 2021 WL 1257440 (11th Cir. Apr. 6, 2021), held that it does not.  Although the fee-shifting statute provides that “the court in its discretion may allow a reasonable attorney’s fee and costs of action to either party,” the Eleventh Circuit determined that the statute is best understood to authorize fee awards against parties and not their counsel.

The plaintiff in this case had an ERISA-governed insurance policy, with life insurance benefits insured by the defendant.  The policy provided that disabled policyholders are entitled to a waiver of policy premiums for the duration of their disability.  The defendant insurer denied the plaintiff this benefit upon determining that she was not disabled from “any occupation.”  The plaintiff hired an attorney to appeal the adverse benefits determination, but the decision was upheld.  The plaintiff then filed a lawsuit against the defendant.  In the meantime, however, the defendant reinstated the plaintiff’s coverage and the waiver of premium benefit retroactive to the original termination date.  Following this, the district court denied the plaintiff’s motion for summary judgment as moot with leave to file an amended complaint.

After the plaintiff filed two amended complaints (which contained exactly the same counts as the original complaint) and responded to interrogatories issued directly from the district court, the district court held a status conference.  At that conference, the district court held that Count I was moot and Count II was not ripe for review, where the plaintiff sought an advisory opinion about her rights if the defendant were to render an adverse benefits determination in the future.  The Eleventh Circuit affirmed, in an opinion by Judge Andrew Brasher.

On remand, both parties moved for attorney’s fees under § 1132(g)(1) and the district court granted both motions in part.  The district court awarded attorney’s fees to the plaintiff for the work she performed up until the defendant reinstated her policy and awarded attorney’s fees to the defendant for work performed after it reinstated the policy.  Significantly, the court directed the defendant to pay the plaintiff’s fees, and the plaintiff’s counsel to pay the defendant’s fees.  The court entered the fee award against plaintiff’s counsel for two specific reasons: (1) if he had brought the claims with clarity, the case would have ended much earlier, and (2) he had 30 years of ERISA experience and should have known that the case was moot.

Following this, the plaintiff filed a motion to alter the judgment.  The district court denied it within the hour and without a response from the defendant, and the plaintiff appealed.  The defendant cross-appealed, arguing that attorney’s fees should have been assessed against both the plaintiff and her attorney. 

In holding that ERISA’s fee-shifting statute does not permit a court to impose a fee award against a party’s attorney, the court cited five reasons based in “precedent, common sense, and principles of statutory interpretation” to establish its holding.  First, the court reasoned that its reading of the statute accords with common law principles informing its interpretation of the statute.  Noting that fee-shifting statutes must be read strictly and with a presumption favoring long-established legal principles, including the American Rule, the court considered Title VII of the Civil Rights Act.  The court recalled its decision from nearly 40 years prior, in which it held that Title VII’s fee-shifting provision did not support an attorney’s fee award against counsel.  Similar to ERISA’s fee-shifting provision, that statute provided for a fee award without identifying who must pay.  Because ERISA is also silent about who must pay, the court reasoned that the statute does not permit a court to award fees against counsel.  The court noted that this remained true, even though ERISA’s fee-shifting provision does not create a presumption in favor of awarding fees, unlike Title VII.

Second, the court reasoned that this reading is consistent with its reading of ERISA generally.  The court determined that the caselaw establishes that ERISA is “not primarily about punishing misconduct.” Reviewing the five-factor test to determine whether to award fees under ERISA, the court concluded that the factors focus on the parties, not their attorneys, and nothing in the test indicated that an attorney should be liable for paying a party’s fees.  The court found no benefit to creating “a special sanctions regime for ERISA lawyers,” and noted that such a standard would undermine ERISA by making it more difficult for beneficiaries and insurance plans to hire counsel wary of the personal risk associated with taking ERISA cases.

Third, the court found that its holding minimizes any disruption to the attorney-client relationship, which could be compromised by potential spinoff fee litigation like the case at hand.  Fourth, the court reasoned that its holding is in alignment with the longstanding rule that “clients are responsible for the actions of their lawyers, not the other way around.”  Fifth, the court held that interpreting the statute to allow fee awards against attorneys would circumvent procedures to sanction attorney misconduct.

Posted by Laura Smithman.

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