Papotto v. Hartford Life & Acc.Ins.Co., 2013 U.S.App.LEXIS 19660 (3d Cir. September 26, 2013) is a significant recently issued case involving ERISA civil procedure. The underlying issue in this case dealt with an accidental death and dismemberment insurance policy. The policy excluded losses “sustained while Intoxicated.” Because the decedent had consumed alcohol prior to his death, Hartford denied the benefit claim; however, the district court ruled that there had to be a causal connection between intoxication and death, and remanded the case to Hartford for reconsideration. The court of appeals determined that it lacked jurisdiction to review the remand order either as a final judgment or under the collateral order doctrine and dismissed the appeal.
The decedent, Frank Papotto, Jr., died when he fell from a golf cart to retrieve his cell phone and sustained a fatal head injury. At the time of his death, he had consumed four to five beers, and his blood alcohol level was over the New Jersey legal limit for operating a motor vehicle. Hartford maintained that the decedent’s blood alcohol level 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 re-opening of the record.
The court of appeals pointed out that it first had to address whether it had appellate jurisdiction. The court first noted that its jurisdiction is predominantly over appeals from “final decisions of the district courts of the United States.” (citing 28 U.S.C. § 1291). The court added, “A final decision is one that ‘ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.'” (citing Harris v. Kellogg Brown & Root Servs., Inc., 618 F.3d 398, 400 (3d Cir. 2010)).
Appellate jurisdiction therefore depends on whether the district court’s decision can be characterized as “final.”
The court further noted, though, that there is another means of obtaining appellate jurisdiction, the “collateral order doctrine” which was developed by Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 546 (1949). That doctrine is only applicable 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.” (citing Coopers & Lybrand v. Livesay, 437 U.S. 463, 468 (1978)).
Addressing finality first, the court observed that remands to ERISA plan administrators are “analogous to remands to administrative agencies.” (citing Rekstad v. First Bank Sys., Inc., 238 F.3d 1259, 1262 (10th Cir. 2001); Petralia v. AT&T Global Info. Solutions Co., 114 F.3d 352, 354 (1st Cir. 1997)). Hence, the court examined its jurisprudence relating to remands to administrative agencies, initially noting, “The general principle enunciated by this [C]ourt is that district court orders remanding cases to administrative agencies are not final and appealable.” (citing Bhd. of Maint. Way Emps. v. Consol. Rail Corp., 864 F.2d 283, 285 (3d Cir. 1988)). However, a remand order may be deemed final if “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.” (citing Kreider Dairy Farms, Inc. v. Glickman, 190 F.3d 113, 118 (3d Cir. 1999)). The Third Circuit has developed 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.3 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.
(citing AJA Assocs. v. Army Corps of Eng’rs, 817 F.2d 1070, 1073 (3d Cir. 1987)). Applying that test, the court determined that orders directing remands for consideration of additional evidence are non-appealable since the order does not “finally resolve” anything. The court noted that Dickens v. Aetna Life Ins. Co., 677 F.3d 228, 231-32 (4th Cir. 2012) had reached the same conclusion.
The court also examined the second part of the remand order which required it to read a causation requirement into the intoxication exclusion and determine whether the facts presented supported such a conclusion. The court asked whether that part of the order “make[s] an ultimate determination as to eligibility, thus leaving the plan administrator with nothing left to do but issue an order? (citing Gerhardt v. Liberty Life Assur. Co. of Boston, 574 F.3d 505, 508 (8th Cir. 2009) (explaining that a final order is one that “leaves nothing for the [lower] court to do but execute the judgment” (internal quotation marks omitted)); Rekstad, 238 F.3d at 1262 (finding remands final when the district court “essentially instructs the agency to rule in favor of the [one party]”). The court also cited Spradley v. Owens-Illinois Hourly Employees Welfare Benefit Plan. 686 F.3d 1135, 1139-40 (10th Cir. 2012) for the same proposition; i.e., that when the administrator is essentially directed to rule for the plaintiff, the remand order is 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. Although the court acknowledged that other courts have deemed ERISA remands final, the Third Circuit opined that those rulings are “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)).
The court also determined that even though the second prong, “importance,” is met, as to the third prong, the court determined that a denial of immediate appellate review of a remand order would not prevent a later appellate review. Even though a remand might lead the insurer to decide for the claimant and thus potentially preclude the insurer’s ability to challenge the district court’s order requiring that intoxication be causally related to death, the Third Circuit determined that the district court could still retain jurisdiction and later render a final judgment.
Turning to the question of whether the collateral order doctrine was applicable, the court explained that an interim decision is reviewable 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.” (citing Sell v. United States, 539 U.S. 166, 176 (2003)). The court determined that its discussion of the issue of finality showed that neither the first nor the third prongs are satisfied, and that the separateness prong is met only when the issue is “completely divorced” from the merits of the underlying dispute. Since fact-finding on the merits remained, that prong could not be met. Thus, the appeal was dismissed.
Discussion: This ruling failed to address a critical preliminary question. While the court was entirely correct in noting that ERISA remands are analogous to administrative remands, it never examined the critical difference between ERISA “civil actions” and administrative cases where remands are statutorily authorized. For example, 42 U.S.C. § 405(g) explicitly permits remands in Social Security cases where a reviewing court finds the decision is unsupported by substantial evidence or additional evidence needs to be considered. See, generally, SEC v. Chenery, 318 U.S. 80 (1943). However, ERISA is not governed by the Administrative Procedure Act, 5 U.S.C. § 551 et seq. The statute permitting aggrieved claimants to pursue legal action to redress claim denials authorizes a “civil action” pursuant to 29 U.S.C. § 1132(a)(1)(B). The use of the term “civil action” invokes the Federal Rules of Civil Procedure rather thany administrative law statute. 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. This 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. See, Chandler v. Roudebush, 425 U.S. 840 (1976). Most recently, in Kappos v. Hyatt, 132 U.S. 1690 (2012), the Supreme Court reaffirmed that a grant of the right to bring a civil action requires trial proceedings even if a federal agency determination is at issue. Absent any terminology in either the statute itself or its legislative history, administrative procedures, including remands, are therefore both extra-statutory and unconstitutional.
A critical case that recognized this problem but then glossed over the issue is Perlman v. Swiss Bank Corporation, 195 F.3d 975, 978 (7th Cir. 1999) where the court remarked, “Although it is doubtful as an original matter that a district court may “remand” ERISA claims, as if to administrative agencies, we have held that courts may treat welfare benefit plans just like administrative law judges implementing the Social Security disability-benefits program. (citing Quinn v. Blue Cross & Blue Shield Ass’n, 161 F.3d 472, 476-78 (7th Cir. 1998); Schleibaum v. Kmart, 153 F.3d 496, 503 (7th Cir. 1998)). Yet the court never explained why courts have issued such holdings, or whether such holdings are appropriate. The court added, “Remands to plan administrators serve the same functions as remands to the Commissioner [of Social Security],” (195 F.3d at 979), yet failed to note that remands to the Commissioner are statutorily authorized while ERISA remands are not.
Thus, the question should not be whether the court’s remand order was appealable; the question the Third Circuit should have asked is whether the district court even had the authority to issue a remand order. Under the Federal Rules of Civil Procedure, the district court properly denied summary judgment. But instead of a remand, the court should have permitted a trial on the question of whether the decedent’s death was caused by his consumption of intoxicating beverages or whether his accidental death would have occurred irrespective of his consumption of beer. There would have been but one proceeding, which would have avoided the complex conundrum raised by the Third Circuit of whether, if Hartford granted benefits, it could still have appealed the district court’s construction of its policy to require causality.
For further information, contact Mark DeBofsky – [email protected]. DeBofsky, Sherman & Casciari are Chicago-based disability benefits, employee benefits, and ERISA attorneys. A shortened version of this blog will soon be appearing in the Chicago Daily Law Bulletin.