Special Fee Shifting Statutes: District Court’s Denial Of Attorney’s Fees To ERISA Plaintiff Bringing Breach Of Fiduciary Duty Claim Affirmed On Appeal

Plaintiff’s Requested Fees Were Incurred During His Successful Administrative Appeal For Denial Of Benefits, Not For Breach Of Fiduciary Duty, Nor During An Action In Civil Court, And Were Therefore Not Recoverable.

           The Employment Retirement Act of 1974 (ERISA) provides for two types of actions – a claim for denial of benefits under 29 U.S.C. § 1132(a)(1)(B), and a claim for breach of fiduciary duty under § 1132(a)(3).  ERISA mandates that plaintiffs claiming a denial of benefits must complete the process of administrative review in an attempt to resolve the issue prior to bringing a civil action. 

            In Castillo v. Metropolitan Life Ins. Co., Case No. 19-56093 (9^th Cir. August 17, 2020) (published), plaintiff won his claim for denial of benefits at the administrative level.  Afterward, in an attempt to recover attorney’s fees he incurred during the administrative process, plaintiff filed a civil action against defendant for breach of fiduciary duty. The district court – finding attorney’s fees incurred in the administrative appeal were not recoverable as “other appropriate equitable relief” under § 1132(a)(3) – granted defendant’s motion to dismiss and denied plaintiff’s request.

            The Ninth Circuit affirmed on appeal. 

            Plaintiff’s argument on appeal – that an award of attorney’s fees is “appropriate equitable relief” under § 1132(a)(3) – had some limited merit under a “make-whole relief” theory that would put “the beneficiary in the position he or she would have attained but for the trustee’s breach.” (Skinner v. Northrop Grumman Ret. Plan B, 673 F.3d 1162, 1167 (9^th Cir. 2012).)  However, his argument ultimately failed based on two factors.

            First, plaintiff’s argument conflicted with the 9^th Circuit’s previous decision in Cann v. Carpenters’ Pension Trust Fund for Northern California, 989 F.3d 313, 316 (9^th Cir. 1993).  There, the Ninth Circuit concluded that attorney’s fees incurred in an administrative proceeding are not recoverable under ERISA’s fee-shifting provision, § 1132(g).  Such an award would undermine ERISA’s purpose in promoting plan soundness and stability by encouraging plans to pay questionable claims in order to avoid fees liability.  Under plaintiff’s argument, the availability of fees incurred for the administrative phase of a benefits dispute “would turn on whether the claimant could successfully recharacterize a denial-of-benefits claim as a claim for breach of fiduciary duty.”

            Second, plaintiff’s argument did not account for the 9^th Circuit’s obligation to read § 1132(a)(3) in conjunction with § 1132(g).  (Util. Air Reg. Grp. v. EPA, 573 U.S. 302, 321 (2014) quoting Robinson v. Shell Oil Co., 519 U.S. 337, 341 (1997).)  Section 1132(g) authorizes an award of fees incurred in a civil action - with “[t]he word ‘action’ generally designat[ing] only proceedings in court, not administrative proceedings.”  (See Cann, supra, 989 F.3d at p. 316.)  Additionally, as § 1132(g) is silent as to fees incurred in an administrative proceeding, there is a presumption that this omission is an exclusion.  (Copeland v. Ryan, 852 F.3d 900, 907 (9th Cir. 2017) quoting Boudette v. Barnette, 923 F.2d 754, 757 (9th Cir. 1991).)