When do Attorney’s Fees

Shift in ERISA Cases?

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Supreme Court: Plaintiff

Need Not Actually Win

        The U.S. Supreme Court recently ruled that a party who achieves “some degree of success on the merits” in ERISA litigation is entitled to reasonable attorney’s fees.  Hardt v Reliance Standard Life, 560 U. S. ____ , No. 09-448 (May 24, 2010).

            Bridget Hardt had applied for long-term disability benefits from her employer, and when its claims administrator, Reliance Standard Life, denied her claim, she made the required internal claim.  Reliance had hired a physician and vocational rehabilitation expert to examine the file (but not Hardt), and based on their input, Reliance had denied her LTD benefits.  The internal appeal went the same way, so she sued.

            The trial court found that Reliance had ignored much of the medical evidence in her file.  The court was to an extent persuaded that Hardt was entitled to LTD benefits, but sent the matter back to Reliance to reconsider its determination based on the record as a whole.  Shortly thereafter, under a tight schedule imposed by the court, Reliance reversed itself and approved her application for benefits.

            Hardt then sought attorney’s fees under ERISA, §502(g)(1), arguing she was a “prevailing party”.  The trial court awarded fees, but the Fourth Circuit Court of Appeals disagreed, ruling that she had only obtained an order remanding the case to the claims administrator.

            But a 9-0 ruling from the U.S. Supreme Court reversed.  Section 502(g)(2) provides that the court (in an ERISA suit) “in its discretion may allow a reasonable attorney’s fee and costs of action to either party.”  Since a companion provision covering multiemployer trust fund cases, §502(g)(1), explicitly provides for fees when a plaintiff obtains “a judgment in favor of the plan,” the Court found that a party need not be a “prevailing party” to be awarded fees.

            The court stressed that some degree of success must have been met.  It also rejected the five-part test lower courts have used in fee-shifting cases.

            Here, Hardt had indeed enjoyed “some success” in her litigation, having persuaded a trial judge that the medical record as a whole had been glossed over by the claims administrator, leading the court to remand the case and ordering a second review and determination within thirty days.

 

6/11/10