ERISA Attorney Fees: An Unadulterated Rant on Conkright and Hardt


Heart of my Hardt. I love that mel-o-dy.

The Supreme Court heard oral argument in Hardt v. Reliance Standard last week. There, Hardt sought disability benefits from his employer’s LTD Plan, insured by Reliance Standard. The trial court found that Reliance had abused its discretion in denying benefits and remanded it to Reliance to reconsider within 30 days or Judgment would be entered for plaintiff. Reliance reconsidered, granted the benefits and the district court granted Hardt’s subsequent Motion for Attorney Fees. The Fourth Circuit reversed the fee award, holding that although ERISA does not require prevailing party status, plaintiff did not qualify for fees because he did not achieve sufficient success on the merits. All he got was a remand but no substantive benefits.

The oral argument focused on whether Hardt’s remand order achieved a substantive or procedural victory, whether whatever he got was enough for sufficient success to warrant a fee award, whether the level of success should be considered as merely one of the factors in the decision to award fees or an absolute bar to such an award, whether Hardt needed to or even obtained a "Judgment" in his favor, and whether Hardt could have achieved complete success simply by seeking remand as a remedy instead of a benefits remedy.

It’s all very interesting. But the smart money is that the Court will say that Hardt is entitled to ask for fees even though not receiving a Judgment for the benefits because a remand to the plan administrator is a substantive, not procedural, remedy. Then we’ll all be able to go on with our daily lives as before.

However.

Let’s harken back to the golden days of yesteryear when we were discussing Conkright and what it might mean. Does it mean that a court never actually gets to decide entitlement to benefits, but rather only gets to decide either (a) the claimant gets nothing or (b) the plan gets another shot, retaining discretion, at showing the claimant should get nothing? That’s what Chief Justice Roberts thinks. At page 30:15 of the Hardt transcript, in an exchange on Conkright, he said:

CHIEF JUSTICE ROBERTS: I would have thought that it [Conkright]-- one thing it did emphasize is that in the typical case, the likely relief is going to be sending it back rather than making a judicial decision, which -which seems to me, then, that -- and then presumably, in most cases, the person would prevail before the plan administrator [I’m moving to the planet Chief Justice Roberts lives on].

So given Conkright, your position is going to severely limit the circumstances under which Plaintiffs are entitled to fees.

Oh great.

Two friends report that they have already received briefing in their cases where the insurance companies have taken the position that the court has no business providing the plaintiff with any remedy other than a remand -- and a remand (mulligan) can only be ordered if there is an abuse of discretion. The troubles begin.

Idle Question: Did Conkright really hold that "a single honest mistake" constitutes an abuse of discretion? I thought an abuse of discretion was a position "no reasonable person" would take, a "wholly unreasonable" position, a position so ridiculous as to deserve only a "loud guffaw." Will claimants now be able to argue that even a "single honest mistake" is sufficient to constitute an abuse of discretion -- that "no reasonable person" standard is out the window?

But I digress. Frank will argue that if the Plan has to pay the claimant’s attorney fees employers will be discouraged from providing these generous voluntary plans. He believes these plans arise from the goodness of the employer’s heart and that any cost beyond what an employer "anticipates" will be motivation to cancel the plan. From the plaintiff’s perspective, that would be fine. If the employer believes that any plan that is expected to meet fundamental notions of fair play and due process is too expensive, then let’s hang it up and just give the employees the cash money the employer "anticipates" and then we can have transparency in the competition for the good employees. After all, how many potential employees when comparing employment offers factor in whether the employer has discretionary review in its benefits plans?

Does anyone reading this (either of you) really think that it is cost effective to litigate arcane issues of how many conflicts have to dance on the head of a pin before a wrong decision becomes so wrong as to constitute an abuse of discretion? Wouldn't it be easier for disputes to be resolved on who is right and who is wrong?

Hardt will be good news for lawyers, lousy news for clients. Client: "How did we come out?" Lawyer: "We won. You might get nothing, I get paid." And so shall it forever be. I guess that's a fraction better than, "Lawyer: I can't take your case because after trial, remand, fee motion, and appeal, odds are I won't get paid."

-- Ron Dean