How Can an ERISA Plaintiff Recover Attorneys’ Fees in the Fifth Circuit?

On June 29, 2020, the Fifth Circuit Court of Appeals – in Katherine P. v. Humana, an ERISA health benefits case where the plan administrator denied benefits – ruled against our client, Katherine P., concluding that she was not currently entitled to attorneys’ fees. This ruling came one month after the same court ruled in favor of Katherine, reinstating her case and sending us back for a bench trial later this year. How did we get here, and what does it mean for other ERISA plaintiffs in the Fifth Circuit?

Factual Background

In 2012, Katherine was a 21-year-old who was suffering from a severe eating disorder, related physical ailments, and bipolar disorder. When she followed the advice of her doctors and sought a more intensive partial hospitalization treatment protocol for her mental health disorders, Humana initially approved this treatment under her plan, which promises to pay for all medically necessary mental health treatment. But after only 12 days, and without examining Katherine or speaking with her treating providers, Humana determined that this treatment was no longer medically necessary. It immediately stopped paying for the treatment, leaving Katherine and her family financially responsible for the rest of her treatment. Fortunately, they were able to personally pay for the final two and a half months of treatment.

Katherine filed an appeal with Humana, providing all of her medical records, plus other evidence showing that her treatment was medically necessary. Humana denied the appeal, forcing Katherine to file this lawsuit in February 2014.

The Mihalik Criteria v. The Plan

The central issue in this case is whether Katherine’s ongoing treatment was medically necessary. The Plan defines medically necessary as “health care services that a health care practitioner exercising prudent clinical judgment would provide” that are “[i]n accordance with nationally recognized standards of medical practice,” “clinically appropriate,” “[n]ot primarily for the convenience of the patient” or her providers, and “[n]ot more costly than an alternative” that would be just as effective. “Medically necessary” services must also have a grounding in “standards that are based on credible scientific evidence.”

Rather than rely on the Plan, Humana instead relied on something called the Mihalik Criteria, a set of guidelines created for the insurance industry that it has tried to keep secret from the public. The Criteria provide four factors for determining if partial hospitalization is medically necessary. Per the criteria, partial hospitalization is medically necessary if a patient meets the first two factors (ED.PM.1 and ED.PM.2) and either one of the last two (ED.PM.3 and ED.PM.4). Humana determined that Katherine did not meet two of these criteria. The district court granted Humana summary judgment, concluding that Katherine failed ED.PM.3 and the ED.PM.4.2 sub-criteria.

Fifth Circuit’s Analysis

In this lawsuit, Katherine argued that Humana’s medical record reviewers were biased, unqualified, and used improper criteria in reviewing the claim. In the May 14, 2020 opinion, the Fifth Circuit found evidence that there was a genuine dispute about whether Katherine met the ED.PM.4.2 sub-criteria. The ED.PM.4.2 requires that a patient show that “[t]reatment at a less intense level of care has been unsuccessful in controlling” her eating disorder. The Court found evidence that Katherine met that requirement. For example, in her last appeal to Humana, Katherine provided a declaration describing her history of failed treatment. In it, she listed past failed treatment regimens, including outpatient treatment. Her mother likewise provided a declaration with the same evidence. Furthermore, Katherine’s physicians said she was “unable to follow a weight gain meal plan and to abstain from symptoms of purging and restricting while she was at a lower level of care.” The Court noted that although it would not give her doctors’ opinions “special weight,” it was competent summary judgment evidence.

The Court found that summary judgment for Humana was inappropriate. it thus remanded the case back to the district court for a bench trial. The district court will have the ability to decide exactly how this trial will proceed. For instance, it could have oral argument, review the administrative record, then make findings of fact and conclusions of law.

The Attorneys’ Fee Issue

Based on the Court’s May ruling, Katherine filed a motion for her attorneys’ fees. Under ERISA, a court may award attorneys’ fees “in its discretion”. 29 U.S.C. §1132(g)(1). The party seeking fees does not have to be a prevailing party, and it is entitled to fees if it can show “some degree of success on the merits”. Because Katherine’s case was revived from the dead and remanded back for a bench trial, she sought her reasonable attorney’ fees for the successful appeal. Humana responded by personally attacking Katherine’s lawyers, arguing that the case was driven by their greed and that their rates were unreasonably high.

On June 29, the Fifth Circuit concluded that its discretion to award attorneys’ fees under these facts was limited. In denying Katherine’s motion, the Court stated that Katherine had not achieved any success on the merits: her victory was “purely procedural” because the Court was simply allowing her to proceed forward with her claim.

Consequences for Future ERISA Attorneys’ Fees Cases

The decision of the Fifth Court in this case shows a lack of willingness to award attorneys’ fees to plaintiffs when they successfully fight off summary judgment in appeal. Although the Court noted some factual arguments that might justify Katherine’s success at trial, it would not award attorneys’ fees for keeping the case alive to actually get to trial.

What does this mean for other ERISA plaintiffs in the Fifth Circuit? Unless you are a prevailing party on the merits of your case, your chances of recovering your attorneys’ fees are not great. After all, the Court already ruled last year that overturning 26 years of caselaw and fundamentally changing the standard of review in the Fifth Circuit was not enough to justify attorneys’ fees. (“Securing a change in the standard of judicial review of Humana’s factual determinations is certainly a procedural success, but it’s not success on the merits of Ariana’s benefits claim.”). Ariana M. v. Humana Health Plan of Tex., Inc., 792 F. App’x 287, 290 (5th Cir. 2019), cert. denied, 591 U.S. ____ (U.S. June 22, 2020) (No. 19-980).

There is a Circuit split on when ERISA plaintiffs can recover attorneys’ fees after winning at the appellate level. The U.S. Supreme Court has decided that issue is not currently ripe, but perhaps it will change its mind in time. Although the Fifth Circuit has shifted to a broader, more participant-friendly standard of review, ERISA plan participants in the Fifth Circuit must remind courts that ERISA’s purpose is to protect the interests of employees.

In the meantime, Katherine’s case proceeds to trial. At trial, the district will get a second chance to review whether Katherine’s partial hospitalization treatment was medically necessary. Humana had previously approved only 12 days out of Katherine’s nearly three month stay. If Katherine “achieves some success on the merits on remand, she may ask for these fees then.” Katherine P. v. Humana, June 29, 2020.

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