Attorney’s Fees Awarded for Lawsuit Resulting in Remand to Plan Administrator

The Supreme Court, in Hardt v. Reliance Standard Life Insurance Co., decided that attorney’s fees can be awarded to a participant where a case was remanded to the plan administrator and the claim was then granted. The attempt to prevent the award was based on the premises that (a) the person requesting an award of attorney’s fees must be a “prevailing party” in the lawsuit, and (b) “a fee claimant is a “prevailing party” only if he has obtained an “enforceable judgmen[t]on the merits ” or a “court-ordered consent decre[e]”.

The logic of the decision was that the specific language of ERISA does not require “prevailing party” status, but only that the person seeking fees show “some degree of success on the merits”.

This rule is to be applied not just in determining whether a court has authority to make an award of attorney’s fees but also in reviewing that court’s exercise of discretion in making the award. This, in effect, overturned the existing five factor analysis applied by the lower courts. Described by the Supreme Court as “(1) the degree of opposing parties’ culpability or bad faith; (2) ability of opposing parties to satisfy an award of attorneys’ fees; (3) whether an award of attorneys’ fees against the opposing parties would deter other persons acting under similar circumstances; (4) whether the parties requesting attorneys’ fees sought to benefit all participants and beneficiaries of an ERISA plan or to resolve a significant legal question regarding ERISA itself; and (5) the relative merits of the parties’ positions.” The only limitations on the capacity of a court to award attorney’s fees are that the result has to be more that “trivial success on the merits” or a “purely procedural victory.”

This case is primarily being written up as to the first issue, whether the participant/claimant has to be a “prevailing party.” However, the lack of meaningful standards for reviewing the exercise of discretion by the court making the award is actually more troubling. Until the courts begin to establish a track record of making and reviewing awards and denials of awards under this decision, plans and plan administrators will live with uncertainty. Logically, since most cases outside of disability benefits are rejected, this broad ability to make awards could be advantageous. However, in the real world it is unlikely that plans will be awarded attorney’s fees at anything like the rate of awards to participants, because that second rejected factor will be applied, explicitly or implicitly.