Desharnais v. UNUM Life Insurance Company of America

Background

Matthew Desharnais brought one claim under § 502(a)(1)(B) of the Employee Retirement Income Security Act (ERISA), seeking long-term disability benefits under an employee benefit plan sponsored by his law firm and insured and administered by Unum Life Insurance Company of America. Unum initially approved his claim, then terminated benefits after determining that he was no longer unable to perform his occupational duties.

Desharnais appealed through Unum’s administrative process. Before Unum completed that review, Desharnais filed this action. The next day, Unum reinstated his benefits under a reservation of rights, including retroactive benefits, while it continued evaluating the claim. The parties later agreed to continue case-management proceedings while Desharnais underwent an independent medical examination and Unum reviewed additional medical information. Unum eventually reopened the claim and assured Desharnais that it would approve benefits beyond the policy’s “own occupation” period and into the “any occupation” period.

Desharnais then moved for attorneys’ fees and costs under 29 U.S.C. § 1132(g)(1). He argued that he achieved the relief sought and that the lawsuit was at least one factor causing Unum to reverse its denial. Unum argued that Desharnais had filed prematurely because he had not exhausted the plan’s administrative remedies and that the reinstatement resulted from the continuing administrative review and new medical evidence.

Legal standard

The court explained that ERISA allows, but does not require, an award of reasonable attorneys’ fees and costs to either party. Under Hardt v. Reliance Standard Life Insurance Co., a fee claimant must first show “some degree of success on the merits.” Trivial success or a purely procedural victory is not enough. If that requirement is met, courts generally consider five factors identified in Hummell v. S.E. Rykoff & Co.: the opposing party’s culpability or bad faith, its ability to pay, whether an award would deter similar conduct, whether the fee claimant sought to benefit plan participants generally or resolve an important ERISA question, and the relative merits of the parties’ positions.

Discussion

The court found that Desharnais obtained the relief requested and that his success was not trivial. But the court had not decided whether Unum violated ERISA or whether Desharnais exhausted his administrative remedies. It also had not sent the claim back to Unum for further consideration. Instead, Unum reinstated benefits through the ongoing administrative process, after reviewing new medical information, including an independent medical examination report, a job simulation assessment, a functional capacity evaluation, and updated medical records.

The court recognized that an ERISA plaintiff may potentially recover fees under a “catalyst theory,” under which a plaintiff may qualify for fees when the lawsuit contributes to the desired result even without a judgment. However, the court found that Desharnais had not shown that this action contributed to Unum’s decision. The court’s involvement had been limited to case-management continuances that allowed the administrative review to continue; it had not ordered Unum to reconsider the claim, required an independent medical examination, or made a merits ruling. The court therefore concluded that Desharnais had not shown the required “some success on the merits.”

The court also considered the Hummell factors in the alternative. The record was insufficient to determine whether Unum acted in bad faith or culpably, so the first factor was neutral. Unum did not dispute its ability to pay, making the second factor favor Desharnais. The deterrence factor was neutral because the court had not found that Unum’s denial was wrongful, culpable, or in bad faith. The factor concerning benefits to other plan participants favored Unum because Desharnais sought only his own disability benefits, not a class-wide or plan-wide benefit. The relative-merits factor was neutral because neither party was a clear winner or loser in the federal action. On balance, the factors weighed against awarding fees.

Disposition

The court DENIED Desharnais’s motion for attorneys’ fees and costs. It directed the parties to file, within fourteen days of the order, either a stipulation dismissing the action or a joint status report explaining how they wished to proceed. The order was signed by United States District Judge Edward J. Davila.