Remands As Final Judgments? Court Dismisses Erisa Case

By Mark D. DeBofsky
Mark D. DeBofsky is a name partner of DeBofsky, Sherman & Casciari, PC. He handles civil and appellate litigation involving employee benefits, disability insurance and other insurance claims and coverage, and Social Security law. He can be reached at mdebofsky@debofsky.com.

Federal courts of appeals have limited jurisdiction and may only hear appeals from final judgments.

Recently, the 3rd U.S. Circuit Court of Appeals was called upon to decide whether it had jurisdiction to hear an appeal of a benefit case decided under the Employee Retirement Income Security Act (ERISA). Instead of entering judgment outright, the district court remanded the case to the insurer that had denied benefits to reconsider the merits of the dispute. In Papotto v. Hartford Life & Acc.Ins.Co., 2013 U.S.App.LEXIS 19660 (3d Cir. Sept. 26, 2013), the 3rd Circuit concluded that it lacked appellate jurisdiction and dismissed the appeal.

The underlying case dealt with an accidental death and dismemberment insurance policy that excluded losses "sustained while intoxicated." The decedent, Frank Papotto Jr., died when he fell from a golf cart to retrieve his cellphone and sustained a fatal head injury. Immediately prior to his fatal accident, Papotto had consumed several beers and his blood alcohol level exceeded the New Jersey legal limit for operating a motor vehicle.

Hartford maintained that the decedent's blood alcohol level alone was sufficient to invoke the exclusion. The district court disagreed, finding that coverage was barred "only when intoxication caused or contributed to the loss or death."

The court remanded the matter to Hartford to reopen the record to obtain additional evidence and to reconsider whether the decedent's intoxication was a contributing factor to his death. Hartford appealed and the plaintiff cross-appealed from the portion of the court's order permitting the reopening of the record.

The court of appeals first addressed its own jurisdiction, which is limited to appeals from "final decisions of the district courts of the United States." (citing 28 U.S.C. Section 1291). The court explained that "[a] final decision is one that 'ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.'" (citation omitted).

The court noted that another means of establishing appellate jurisdiction is through the "collateral order doctrine," which applies where an order is issued that "conclusively determine[s] the disputed question, resolve[s] an important issue completely separate from the merits of the action and [is] effectively unreviewable on appeal from a final judgment." (citation omitted).

Addressing finality first, the court observed that remands to ERISA plan administrators are "analogous to remands to administrative agencies." (citing opinions from the 1st and 10th circuits). Even with administrative claims, though, the court pointed out that, in general, orders remanding cases to administrative agencies are not final and appealable unless "a [d]istrict [c]ourt finally resolves an important legal issue in reviewing an administrative agency action and denial of appellate review before remand to the agency would foreclose appellate review as a practical matter." (citation omitted).

The 3rd Circuit applied a three-pronged approach in analyzing the finality rule's applicability to administrative agency remands: 1) the remand "finally resolves" an issue, 2) the legal issue is "important" and 3) denial of immediate review will "foreclose appellate review" in the future.

"Notably, in grappling with our jurisdiction over remands, we have consistently accorded significant weight to the third factor - i.e., potential for evasion of future review. (citation omitted)." Under that standard, remands for consideration of additional evidence are non-appealable since the order does not "finally resolve" anything.

Only in cases when the administrator is essentially directed to rule for the plaintiff are remand orders deemed final and appealable. However, where further action is required, such as the need to consider additional evidence and engage in fact-finding, there is no final resolution.

Acknowledging a split among the circuits on this issue, the 3rd Circuit deemed conflicting rulings "contrary to the Supreme Court's admonition that finality precludes consideration of even a 'fully consummated decision[]' if it is only a 'step[] towards final judgment.' (citing Behrens v. Pelletier, 516 U.S. 299, 305 (1996)).

Turning to the collateral order doctrine, the court explained that an interim decision is reviewable only if it: "1) conclusively determines the disputed question, 2) resolves an important issue completely separate from the merits of the action and 3) is effectively unreviewable on appeal from a final judgment." (citation omitted).

The court determined that since fact-finding on the merits remained, the prong relating to separateness could not be met. Thus, the appeal was dismissed.

The court could have gone even further by questioning whether remands of ERISA cases to private entities is ever appropriate. While it may be true that ERISA remands are analogous to administrative remands, there are critical differences between ERISA "civil actions" and administrative cases where remands are statutorily authorized.

For example, 42 U.S.C. Section 405(g) explicitly permits remands in Social Security cases where a reviewing court finds the agency decision unsupported by substantial evidence or additional evidence needs to be considered. However, ERISA is not governed by the Social Security Act or by the Administrative Procedure Act, 5 U.S.C. Section 551 et seq.

The statute permitting aggrieved claimants to pursue a legal action to redress claim denials authorizes a "civil action" pursuant to 29 U.S.C. Section 1132(a)(1)(B). The use of the term "civil action" invokes the Federal Rules of Civil Procedure rather than any administrative proceeding.

Under Rules 1 and 2 of the Federal Rules of Civil Procedure, there is only one type of civil action and the rules are deemed applicable to all civil actions.

That point has been driven home repeatedly by the Supreme Court, which has held on numerous occasions that all civil actions are entitled to plenary trial procedures. Most recently, in Kappos v. Hyatt, 132 U.S. 1690 (2012), the Supreme Court reaffirmed that the right to bring a civil action requires trial proceedings even if the matter involves a federal agency.

Thus, the 3rd Circuit could also have asked whether the district court even had the authority to issue a remand order. Instead of remanding, the court should have held a trial on the question of whether the decedent's death was caused by his intoxication, the result of which would have been appealable.