Supreme Court Decision on the Award of ERISA Attorneys’ Fees

July 2010Newsletters For Your Benefit

A recent Supreme Court decision established a new standard for the award of attorneys' fees and costs in an ERISA action. In Hardt v. Reliance Standard Life Ins. Co, a disability claimant was entitled to attorneys' fees when she achieved "some degree of success on the merits" of her case. Previously, the standard for the award of attorneys' fees in an ERISA action was founded on the premise that only a "prevailing party" could be entitled to such an award.

Facts

In 2003, Bridget Hardt stopped working for Dan River, Inc. after developing carpal tunnel syndrome. Shortly thereafter, she applied for long-term disability benefits under Dan River's group long-term disability plan. Reliance Standard Life Insurance Co., the insurer, initially granted disability benefits for 24 months; however, Reliance ultimately denied her claim for permanent benefits as totally disabled and informed Hardt her benefits would expire at the end of the 24-month period.

As required under ERISA prior to filing a lawsuit, Hardt exhausted her administrative remedies under the plan before filing suit in a federal district court alleging that Reliance had violated ERISA by wrongfully denying her benefits claim. The district court denied Reliance's summary judgment motion, finding Reliance had acted on incomplete medical information and the benefits denial was not based on substantial evidence. However, the district court also denied Hardt's summary judgment motion, although the court found "compelling evidence" in the record that Hardt was totally disabled and was inclined to rule in her favor. Instead, the district court chose to give Reliance a chance to address the deficiencies in its approach. The court remanded the case to Reliance, giving it 30 days to consider all the evidence and give Hardt the review to which she was entitled under the law. After conducting that review, Reliance found Hardt eligible for long-term disability benefits and paid her $55,250 in accrued, past-due benefits.

Soon thereafter, Hardt filed a motion for attorneys' fees and costs under ERISA Section 502(g)(1), which provides discretionary authority to award attorneys' fees to either party. The district court granted the motion, determining she was a prevailing party, and awarded her $39,149 in attorneys' fees and costs.

Reliance appealed the award, and the Court of Appeals vacated the fees award, holding Hardt failed to establish she was a "prevailing party." The appellate court relied on a recent Supreme Court decision, which found that a fee claimant is a prevailing party only if she has obtained an "enforceable judgment on the merits" or a "court-ordered consent decree." The Court of Appeals reasoned that the district court's remand order did not constitute an enforceable judgment on the merits since the order did not require Reliance to award Hardt benefits and, therefore, it precluded Hardt from establishing prevailing party status. Hardt then filed a petition for a writ of certiorari, asking the Supreme Court to review the lower court's decision.

New Standard

In evaluating whether ERISA limits the award of attorneys' fees to a prevailing party, the Supreme Court stated it must enforce the plain and unambiguous language of ERISA Section 502(g)(1). The Court noted nowhere in ERISA, nor in ERISA's legislative history, is there any reference to the prevailing party standard. Accordingly, the Supreme Court ruled the lower court's failure to interpret the statute on its face, and its decision to add the "prevailing party" term to its interpretation of the statute, represented inventing a statute rather than interpreting one. As such, the Court made it clear that a party seeking fees does not need to be a prevailing party in order to be eligible for an award of attorneys' fees under Section 502(g)(1) and must simply establish "some success on the merits."

Conclusion

The Supreme Court's decision in Hardt establishes a new standard for the award of attorneys' fees in ERISA litigation. Going forward, litigants should be aware the "prevailing party" standard will no longer be applied in awarding fees. Rather, a party may be entitled to fees by simply achieving some degree of success based on the party's position.

For more information, please contact Seth I. Corbin at 412.394.5530 or [email protected].