On May 24, 2010, the U.S. Supreme Court held that a court may award attorney's fees under ERISA § 502(g)(1) to either party as long as the fee claimant "has achieved some degree of success on the merits."
On May 24, 2010, the U.S. Supreme Court held that a court may award attorney's fees under ERISA § 502(g)(1) to either party as long as the fee claimant "has achieved some degree of success on the merits." See Hardt v. Reliance Standard Life Ins. Co. (May 24, 2010). In reaching this decision, the Court overturned a decision of the Fourth Circuit, which held that fees under this provision are only available to "prevailing parties."
In this case Bridget Hardt filed a claim for long-term disability benefits under a plan provided by her employer. Although the employer administered the plan, Reliance determined whether claimants qualified for benefits under the plan and underwrote any benefits awarded. Reliance denied Ms. Hardt's claim and she filed suit in federal court, claiming the company violated ERISA by wrongfully denying her claim for benefits. The federal trial court determined that Reliance's decision denying Ms. Hardt benefits was not based on substantial evidence. The court refused to grant summary judgment to Ms. Hardt, however; instead, it remanded the case to Reliance to review Ms. Hardt's claim "adequately considering all the evidence." The court's order provided that if Reliance did not review the claim within 30 days, "judgment will be issued in favor of Ms. Hardt."
In compliance with the court's order, Reliance reviewed Ms. Hardt's claim, determined that she was eligible for long-term disability benefits, and awarded her $55,250 in accrued, past-due benefits. Ms. Hardt then moved for attorney's fees and costs under ERISA § 502(g)(1) (i.e. 29 U.S.C. § 1132(g)(1)). The trial court granted her request and awarded her $39,149 in costs and attorney's fees. The Fourth Circuit vacated the trial court's order, holding that Ms. Hardt failed to show that she was a "prevailing party." According to the Fourth Circuit, Ms. Hardt was not a prevailing party because the trial court's order remanding the case back to Reliance for further review was not "an enforceable judgment on the merits" or a "court-ordered consent decree."
The Supreme Court reversed the Fourth Circuit's decision. In reaching its decision, the Court first examined the statutory language of ERISA § 502(g)(1), which provides: "In any action under this subchapter . . . by a participant, beneficiary, or fiduciary, the court in its discretion may allow a reasonable attorney's fee and costs of action to either party." The Court noted that the statute does not mention "prevailing party" and does not limit the availability of attorney's fees to a "prevailing party." The court pointed out that the language in § 502(g)(1), which gives a court discretion to award fees and costs to either party, contrasts sharply with the language of ERISA § 502(g)(2) (i.e. 29 U.S.C. § 1132(g)(2)), which governs the availability of attorney's fees in ERISA actions seeking to recover delinquent employer contributions to a multiemployer plan. Section 502(g)(2) specifically states that fees may only be sought by plaintiffs who obtain "a judgment in favor of the plan."
The Court held that the contrast between these two provisions demonstrates that Congress "knows how to impose express limits on the availability of attorney's fees in ERISA cases." Because Congress failed to include an express "prevailing party" requirement in
§ 502(g)(1), the Court held that the Fourth Circuit's decision imposing such a requirement "more closely resembles 'inventing a statute rather than interpreting one.'"
After determining that a party need not be a "prevailing party" to be awarded fees and costs under § 502(g)(1), the Court held that a fees claimant must show "some degree of success on the merits" before a court may award fees under that provision. The Court held that a claimant does not meet this requirement by achieving "trivial success on the merits" or a "purely procedural victory." A claimant can satisfy this requirement if the court can fairly call the outcome of the litigation "some success on the merits" without conducting a lengthy inquiry into the question of whether a particular party's success was "substantial" or occurred on a "central issue."
The Court held that Ms. Hardt met this requirement even though she did not obtain summary judgment on her claim, because the trial court found "compelling evidence" that she was totally disabled and stated that it was "inclined to rule" in her favor. Further, the court ordered Reliance to act on Ms. Hardt's application by "adequately considering all the evidence" within 30 days; otherwise the court would rule in her favor. After complying with the trial court's order, Reliance reversed itself and found Ms. Hardt eligible for long-term disability benefits. The Supreme Court held that this outcome was more than "trivial success on the merits" or a "purely procedural victory" and, accordingly, found that Ms. Hardt achieved "some success on the merits." Thus, the Court upheld the trial court's decision awarding attorney's fees to Ms. Hardt. The Court noted that it was not determining the issue of whether a remand order, without more, constitutes some success on the merits sufficient to justify an award of attorney's fees.
If you have any questions regarding the Court's decision in this case or other employee benefits issues, please contact the Ford & Harrison attorney with whom you usually work or any member of Ford & Harrison's Employee Benefits Practice Group.