Several circuits remain divided over remand orders in ERISA cases

March 14, 2012 By Mark D. DeBofsky

Mark D. DeBofsky is a name partner of Daley, DeBofsky & Bryant. He handles civil and appellate litigation involving employee benefits, disability insurance and other insurance claims and coverage, and Social Security law.

There is currently a circuit split as to whether district court rulings remanding Employee Retirement Income Security Act (ERISA) employee benefit claims to plan administrators are appealable.

In Young v. Prudential Ins.Co. of America, 2012 U.S.App.LEXIS 3387 (11th Cir. Feb. 21, 2012), the 11th U.S. Circuit Court of Appeals held that a remand order is not an appealable order as either a final decision nor appealable under the collateral order doctrine. The plaintiff, Cheryl Young, a law professor at the Florida Coastal School of Law who suffered from multiple sclerosis, sought disability benefits through the law school's group disability insurance policy with Prudential. When benefits were denied, Young sued Prudential under ERISA and the court entered an order granting her summary judgment motion in part but remanding the case to Prudential to decide in the first instance whether Young was disabled. The court found a lack of appellate jurisdiction and dismissed the appeal.

The 11th Circuit explained that its jurisdiction was limited to appeals from "all final decisions of the district courts of the United States." 28 U.S.C. § 1291. A final judgment is one that "ends the litigation on the merits and leaves nothing for the court to do but execute the judgment." Catlin v. United States. 324 U.S. 229, 233, 65 S. Ct. 631, 633, 89 L. Ed. 911 (1945). Citing Shannon v. Jack Eckerd Corp., 55 F.3d 561 (11th Cir. 1995), a health benefits dispute brought under ERISA, the court held a district court's remand to the plan administrator was not a final judgment for two reasons:

First, it did not end the litigation on the merits. We said that "[b]ecause the purpose of a remand order is to continue litigation rather than terminate it, such orders cannot reasonably be construed as terminating litigation on the issues remanded." Id. at 563 (quoting Druid Hills Civic Ass'n v. Fed. Highway Admin. 833 F.2d 1545, 1549 (11th Cir. 1987). Second, the order did not award or deny benefits. Id. Thus, the order had not left the court with "nothing … to do but execute the judgment." Id.

Following that ruling, Young held the district court's order "left unresolved [Young's] entitlement to benefits under the plan" and was therefore "not a final, appealable decision under Section 1291." The court also cited rulings from the 1st, 6th, 8th and 10th circuits, which also hold that ERISA remand orders are not appealable — Petralia v. AT&T Global Info. Solutions Co., 114 F.3d 352, 354-55 (1st Cir. 1997); Bowers v. Sheet Metal Workers' Nat'l Pension Fund, 365 F.3d 535, 537 (6th Cir. 2004); Borntrager v. Cent. States, Se. & Sw. Areas Pension Fund, 425 F.3d 1087, 1091 (8th Cir. 2005); and Graham v. Hartford Life & Accident Ins. Co., 501 F.3d 1153, 1161 (10th Cir. 2007).

The court also found the collateral order doctrine inapplicable. That doctrine permits review of collateral final orders issued by district courts. Cohen v. Beneficial Indus. Loan Corp. 337 U.S. 541, 546-47, 69 S. Ct. 1221, 1225-26, 93 L. Ed. 1528 (1949). However, the collateral order doctrine is only applicable to an order that "conclusively determine[s] the disputed question, resolve[s] an important issue completely separate from the merits of the action and be effectively unreviewable on appeal from a final judgment." Shannon, 55 F.3d at 563 (quoting Coopers & Lybrand v. Livesay. 437 U.S. 463, 468, 98 S. Ct. 2454, 2458, 57 L. Ed. 2d 351 (1978)). Finding that the district court's order failed to meet that standard, the court ruled the collateral order doctrine was inapplicable. Therefore, the appeal was dismissed.

Although several circuits have ruled that remand orders in ERISA cases are not appealable, other circuits, such as the 7th Circuit, deem such orders final and appealable. See, Perlman v. Swiss Bank Corp. 195 F.3d 975 (7th Cir. 1999). But while the issue of jurisdiction is primary, the court failed to ask an even more important fundamental question — from what source did the district court even assert the authority to issue a remand order?

Undoubtedly, similarities between Social Security disability claims and disability claims arising under ERISA, and the ubiquity of remands in Social Security cases, is the source of a similar approach toward ERISA cases. However, there is no provision in ERISA or its legislative history comparable to Sentences 4 and 6 of 42 U.S.C. § 405(g), which specifically authorize remands as a remedy in Social Security administrative review proceedings, whether the court retains jurisdiction or not. Thus, without a statutory basis to impose an administrative law regime on ERISA cases, remands of civil actions violate Article 3 of the U.S. Constitution, which necessitates that federal courts issue final decrees of conclusive character. See, Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 241 (1937).

Haworth also involved a dispute over disability benefits. There, the court upheld the justiciability of a declaratory judgment sought by an insurer as to its legal rights and obligations. The court found that a declaratory judgment of the parties' rights and responsibilities satisfied that rule. However, it is apparent from the quotations from the 11th Circuit's ruling here that the district court did not order a complete declaratory judgment. On the contrary, the court ordered Prudential to simply engage in a do-over.

In addition, Young filed suit pursuant to 29 U.S.C. § 1132(a)(1)(B) "to recover benefits due to [her] under the terms of his plan." That required the district court to issue a final judgment of conclusive character either finding that she was entitled to benefits or that Prudential lawfully denied her claim in accordance with the terms of the policy of insurance. The district court's failure to issue such a ruling resulted in an advisory opinion that lacked constitutional finality.