U.S. Supreme Court Interprets ERISA Attorney's Fee Provision to Allow Awards to Claimants That Achieve Some Degree of Success on the Merits

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By Kathy Davidson Ireland

Bethesda, MD 

In Hardt v. Reliance Standard Life Insurance Co.,1  the Supreme Court examined the general attorney's fee provision of ERISA §502(g)(1), which authorizes a "court in its discretion [to] allow a reasonable attorney's fee and costs of action to either party." The Court held that the fee claimant need not be the "prevailing party" in order to receive such an award, and can be awarded such fees if the claimant has achieved "some degree of success on the merits."

The plaintiff in Hardt alleged that the insurance company's denial of long-term disability benefits from her employer's plan violated ERISA. Both parties filed motions for summary judgment, and the district court denied both motions.  In so doing, however, the district court noted that it was "inclined to rule in Ms. Hardt's favor," but was "giving Reliance the chance to address the deficiencies in its approach." The court remanded the issue to Reliance, which ultimately found her eligible for benefits.

The district court subsequently awarded the plaintiff attorney's fees, but the Fourth Circuit vacated the order on the grounds that the plaintiff failed to establish that she was a "prevailing party." Under the Fourth Circuit's analysis, the plaintiff was not a prevailing party because the district court order "did not require Reliance to award benefits to Hardt," and therefore was not an "enforceable judgment on the merits."

The Supreme Court examined the language of §502(g)(1), and noted that the provision did not contain any reference to a prevailing party. Instead, the Court held, its previous analysis of the attorney's fee provisions of the Clean Air Act in Ruckelshaus v. Sierra Club "lays down the proper markers to guide a court in exercising its discretion" under ERISA §502(g)(1).  Accordingly, a fee claimant under §502(g)(1) must show "some degree of success on the merits," which would not be satisfied by a "trivial success on the merits" or a "purely procedural victory."

The holding in Hardt may impact the award of attorney's fees under §502(g)(1) not only in the Fourth Circuit, but also in the First, Seventh, and Tenth Circuits, each of which has shown some inclination to apply a "prevailing party" standard.2 

For more information, in the Tax Management Portfolios, see Wagner, Bianchi, and Marathas, 374 T.M., ERISA — Litigation, Procedure, Preemption and Other Title I Issues,  and in Tax Practice Series, see ¶5530,  Fiduciary Duties and Prohibited Transactions.

 1 No. 09-448, slip op. (5/24/10). 

 2SeeTate v. Long Term Disability Plan for Salaried Employees of Champion Int'l Corp. #506, 545 F.3d 555, 564 (7th Cir. 2008); Graham v. Hartford Life & Accident Ins. Co., 501 F.3d 1153, 1162 (10th Cir. 2007); Cottrill v. Sparrow, Johnson & Ursillo, Inc., 100 F.3d 220, 225 (1st Cir. 1996).